Biden taps ethanol to help lower fuel prices as consumer inflation surges

US President Joe Biden returns a salute as he steps from Marine One upon arrival at the White House in Washington, US, April 11, 2022. REUTERS/Kevin Lamarque

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WASHINGTON, April 12 (Reuters) – US President Joe Biden will unveil plans on Tuesday to extend the availability of higher biofuel blends of gasoline during the summer to curb soaring fuel costs and to cut reliance on foreign energy sources, the White House said.

The move represents the administration’s latest attempt to tamp down inflation, which hit a new 40-year high on Tuesday.

Biden’s poll numbers have sagged under the weight of higher consumer costs and inflation is seen as a significant liability heading into the November mid-term elections.

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The decision represents a win for the US corn lobby by likely expanding demand for corn-based ethanol and a setback for oil refiners, which view ethanol as competition.

The measure will allow Americans to keep buying E15, a gasoline that uses a 15% ethanol blend, from June 1 to Sept. 15. While E15 is only 10 cents cheaper on average and is less “energy dense,” meaning drivers would need to buy more fuel, it should still help lower expenses, senior administration officials told reporters on a Monday call previewing the announcement.

“Those savings can add up, especially during the summer months, when fuel is elevated and as the supply emergency caused by (Russian President Vladimir) Putin aggression continues,” a senior administration official said.

White House spokesperson Jen Psaki later confirmed the move to reporters on Air Force One en route to Iowa, where Biden planned to make the announcement.

The decision comes after several weeks of internal debate within the White House that pitted environmental advocates like Gina McCarthy against Agricultural Secretary Tom Vilsack, a former governor of Iowa, according to two sources familiar with the discussions.

The summertime ban on E15 was imposed over concerns it contributes to smog in hot weather, though research has shown that the 15% blend may not increase smog relative to the more common 10% blends sold year-round.

Russia’s invasion of Ukraine and sanctions and boycotts that followed launched retail gasoline prices to record highs, a vulnerability for Biden’s fellow Democrats in November’s congressional elections.

Biden last month announced that the United States would sell 180 million barrels of crude from the Strategic Petroleum Reserve at a rate of 1 million barrels per day starting in May, the biggest release from the stockpile since it was created in the 1970s.

CORN VS OIL

Biden will make the E15 extension announcement during a visit to POET Bioprocessing, the largest biofuels producer in the United States in major corn producing state Iowa.

“We applaud President Biden and his administration for recognizing that low-cost, low-carbon ethanol should be given a fair opportunity to strengthen our energy security and reduce record-high pump prices,” Renewable Fuels Association President Geoff Cooper said.

Representatives of the oil industry slammed the administration for the decision.

“Americans are looking for long-term solutions, not short-term political fixes (to high gas prices)” said Ron Chit, a spokesman for the American Petroleum Institute, the oil industry’s main lobbying organization.

“The best way to ensure Americans have access to the affordable and reliable energy they need is to promote policies that incentivize US production and send a clear message that America is open for energy investment,” he said.

The American Fuel and Petrochemical Manufacturers (AFP) industry group questioned whether the expansion of E15 sales was lawful.

To make the change, the Environmental Protection Agency (EPA) is planning to issue a national emergency waiver closer to June, the administration officials said. The EPA is also considering additional action to allow for the use of E15 year-round, the White House said.

“Emergency fuel waivers are short term and reserved for very specific unforeseen events and regionally acute supply disruptions, such as those resulting from a hurricane,” AFP Chief Executive Chet Thompson said.

Iowa Republican Joni Ernst also welcomed the move but echoed calls for a more lasting change.

“This is one step in the right direction,” Ernst said during a 20-minute press call, describing it as one way to combat the rising prices of fuel. “But long term, we need to make sure that this goes into place permanently and that we allow E-15 year-round, ongoing, into the future.”

The courts struck down a prior bid by Biden’s predecessor, Republican Donald Trump, in 2019 to extend a waiver that allowed year-round sales of E15.

The officials previewing Biden’s announcement said his administration would use a different “approach” and “authority” than Trump, but did not offer details.

They also said the EPA would work with states to ensure that there would be no “significant” negative impact on summer air quality due to the extended sale of E15.

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Reporting by Alexandra Alper, Jarrett Renshaw and Steve Holland; additional reporting by Stephanie Kelly and David Morgan; Editing by Muralikumar Anantharaman, Mark Porter and Bill Berkrot

Our Standards: The Thomson Reuters Trust Principles.

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