David Frum gets a lot wrong in his recent article blaming the ethanol industry for empowering Putin. The gist of the case is that the 2005 Energy Policy Act and the follow-up 2007 Energy Independence and Security Act distorted the geopolitical agriculture landscape (pun intended) by initially subsidizing, and for a longer-term mandating, the use of ethanol in gasoline in the U.S., which was ultimately instrumental in making Russia the European and global menace it is today. The path to that conclusion is highly selective. And the oft-disproven-but-never-dead implied policy solution is “drill, baby drill.”
For audacious selectivity, it’s hard to beat Frum’s indictment of ‘$8 billion in annual revenues’ for the world’s largest biofuel company before the pandemic. That number doesn’t even crack the top 50 in pre-Covid oil and gas, a sector which nonetheless heavily benefits from subsidies and tax carve outs.
The main arguments focus on recurring but oft refuted themes of ‘food versus fuel’ doctrine. To the claim that biofuel production imperils global food supplies, independent research says otherwise. Wholly attributing the shifts in U.S. agriculture production to ethanol policy conveniently ignores both economic forces in general and various subsidies which also influence the sector in the U.S. and worldwide. Perhaps most egregious is misunderstanding that high-protein animal feed is actually a valuable coproduct of ethanol production: “[by eliminating ethanol]…more corn would be available for animal feed rather than burned up as automobile fuel…”
On the political front, neither the fundamental consequences of oil dependence in transportation, nor the most effective policies to liberate us from them — for instance, Clean Fuel Standards — are inherently partisan. Some combination of recurring oil crises, kowtowing to despots, and economic devastation have affected every U.S. presidential administration for more than 50 years. And every initiative to date has been woefully insufficient to the challenge of breaking this cycle. That is not a party line; it’s a fact.
Notwithstanding Frum’s selective and politically calculated references to a mass of unnamed policies begun by the Carter administration and a single supportive 2007 campaign statement made by candidate Obama of corn-lovin’ Illinois, the market-distorting ‘widening and deepening in 2005 and 2007’ were in fact the aforementioned bills signed into law by the W. Bush administration for which Frum was a speechwriter. For those of us who ultimately prefer market competition to monopolies, ethanol’s 10% U.S. market share remains the only meaningful dent in oil’s overwhelming dominance in transportation. Policy credit should be given where credit is due.
That’s not to argue for the current approach. Rather than more drilling or new mandates, we need a genuine all-the-above strategy to permanently deprive despots and dictators like Putin of their power over our economy and our security. We don’t need government picking winners and losers. A technology neutral and market-based Clean Fuel Standard can diversify the fuels we use and the resources used to produce them. Clean Fuel Standards also happen to be the most cost-effective transportation policy to address our other major global challenge — climate change. They also reduce other harmful emissions that affect human health, provide market competition by breaking oil’s virtual monopoly, open the door to cheaper fuels to bring down the cost of driving, and insulate our economy from the gyrations of crude oil prices. That counts as a win on all fronts.