RBC I As Americans hop in their cars this summer, gasoline prices are at a six-year high. Thanks to surging demand and continued turmoil in Iraq, gas is quickly approaching $4 per gallon.
With prices rising so fast, there’s never been a more important time for America to invest in alternative sources of energy. The longer we’re dependent on oil, the longer we’re at the mercy of foreign political turmoil.
One of the most promising alternative energy sources is ethanol, a renewable fuel derived from common agricultural goods like corn, wood chips and grasses. Ramping up America’s ethanol production would drive down demand for oil and wean this country off the volatility and sudden price swings that come along with it.
And yet, despite the profound promise of ethanol, some politicians are pushing to stamp it out.
They’re lobbying to repeal the Renewable Fuel Standard (RFS), which requires the use of ethanol in the national fuel supply to promote greater energy independence and a cleaner environment.
This doesn’t make any sense.
The modern energy market was borne out of the substantial industrial shifts stimulated by World War I. The resulting industrial ramp up generated planes, submarines and tanks that all relied on the internal combustion engine. Even after the conflict ceased, the widespread commercial thirst for oil remained strong.
It’s grown steadily since. And America has leaned heavily on oil-rich Persian Gulf nations to feed its demand.
Oil is what’s known as a “global commodity,” meaning it costs the same price regardless of where it is produced. Hence the sad irony, that while the U.S. is domestically producing more oil than at any time in the past 28 years, oil prices have continued to rise.
However, because so much oil comes from the Middle East, it has an outsized influence on global gas prices. Producers in that region have banded together to form a cartel, allowing them to artificially restrict supply and drive up world prices at will.
What’s more, many of the top oil-producing countries in the Gulf are exceptionally unstable and conflict-prone. That turmoil also disrupts supply, leading to price increases the ripple throughout the globe.
The price of ethanol, on the other hand, isn’t set by a monopolistic cartel on the world stage. Ethanol producers are based right here in the States. They’re reliable in a way foreign producers have never been.
That’s why ethanol offers the best hope for America to finally break this dangerous dependence.
It’s estimated that since 2000, U.S. foreign oil imports have dropped by 35 percent because of increased ethanol use.
By Bob Dineen
Renewable Fuels Association
