ly developing nations. Predictably, U.S. ethanol lobbyists paint a dire picture of what reduced mandates would do to gasoline prices. The Renewable Fuels Association, an industry group, last week warned that pump prices would jump more than a dollar a gallon if U.S. regulators followed Texas Gov. Rick Perry’s proposal to waive half the 2008 mandate for 9 billion gallons of ethanol.
But energy experts called that prediction overblown, saying the pump price of gasoline would probably rise just pennies a gallon.
They say U.S. refiners still would buy up to 80 percent of the ethanol they currently use to make reformulated gasoline (RFG), a clean-burning fuel that is required in smoggy parts of the country.
“A big chunk of this year’s mandate is taken care of by the RFG, which is a captive market,” said Antoine Halff, analyst at Newedge Group in New York.
While soaring food prices have shaken the love affair with ethanol and biodiesel, a significant roll-back of ambitious output targets is unlikely in the United States under the administration of President George W. Bush.
“After the election it seems to me quite likely that lawmakers will take a good hard look at the ethanol policy,” Halff said.
In the meantime, the problem of food and fuel inflation will likely add pressure on energy consumer nations to shift away from food-based biofuels.
“The price increases would serve as a force to accelerate the development of non-food-based feedstocks, like biomass and cellulosics,” said Sander Cohan, analyst at Energy Security Analysis Inc. in Boston.
It may also raise the likelihood that the United States will lift a 54 cent per gallon tariff on Brazilian ethanol, which is mostly sugar based, experts said.
“Maybe removing the tariff will be a more expedient way of bringing some relief on corn prices,” said Halff.
Global sugar prices are at historic lows on glutted supplies, while corn prices have hit records and dragged other grain prices as nearly a quarter of the U.S. corn crop goes to make ethanol.
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