GoodFuels

Texas Recipe for $5+ Gas

As many in the biofuels industry are aware, Texas Governor Rick Perry is asking the federal government to remove at least 4.5 billion gallons of ethanol from the marketplace.  His motivation:  the livestock and oil industries that play a prominent role in Texas politics.  As the Associated Press reported yesterday, Texas’ top livestock producers including Pilgrim’s Pride CEO Bo Pilgrim (more than $200,000 over a 4 year period), are huge donors to Governor Perry.

What’s troubling about Governor Perry’s request is that it would do little to achieve his purported goals, namely improved profits for integrated livestock and meat processors.  Governor Perry’s alma mater, Texas A&M, concluded in April that $100+ oil, not ethanol, is driving up the prices of food and feed.  As ethanol is the only alternative available today having a meaningful impact on oil and gasoline demand and price, it would seem that Governor Perry’s push to abandon the American ethanol industry would only make the problems he claims to be addressing even worse.

According to a range of analyses, ethanol is saving Americans between $0.20 and $0.50 per gallon.  By one estimate, a successful waiver by the state of Texas would result in gasoline prices soaring by some 30%.  At today’s prices, that would be gasoline well over $5 per gallon.  What’s more, ethanol is helping reduce both world oil demand by 1 million barrels a day as well as US oil demand by 440,00 barrels per day, and keeping prices of oil at least $21 a barrel cheaper than they otherwise would be.

If $5 gas is your goal, follow Governor Perry’s recipe.  It’s a can’t miss.