"The Gasoline Follies"
The WSJ.com says [pay site]:
Gasoline prices are rising again, and this time Iraq or hurricanes aren't to blame. Congress's energy policy mistakes are finally catching up with it, and American drivers are paying for the bungles."
Drivers can send their thank-you notes to Capitol Hill, which created the conditions for this mess last summer with its latest energy bill. That legislation contained a sop to Midwest corn farmers in the form of a huge new ethanol mandate that began this year and requires drivers to consume 7.5 billion gallons a year by 2012. At the same time, Congress refused to include liability protection for producers of MTBE, a rival oxygen fuel-additive that has become a tort lawyer target. So MTBE makers are pulling out, ethanol makers can't make up the difference quickly enough, and gas supplies are getting squeezed.
[The Cost of Ethanol]
It didn't take an economics degree to see this coming. The MTBE industry's defense in the many lawsuits claiming its product has contaminated water supplies is that since 1990 the government has required use of oxygenates like MTBE. But with that requirement expiring in May, producers and refiners will face far greater liability, which has set off a race to exit the market. Valero, one of the largest manufacturers, has already announced plans to phase out production. Even the pipeline operators that carry MTBE to high-use areas in the Northeast are backing away.
This abrupt cut-off of a product that makes up some 1.4% of the nation's fuel supply -- and far greater percentages in some places -- is certain to wreak price havoc. According to a February EIA report, ethanol production is already running near its capacity of 283,000 barrels a day. Yet "about 130,000 barrels per day of additional ethanol may be needed to replace the MTBE currently used" in gas.
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