The White House is reportedly postponing decisions on requests from Farm Belt states to permit regional sales of gasoline blended with higher ethanol volumes, specifically E15, according to two sources familiar with the matter. This delay is attributed to warnings from the oil industry, expressing concerns about potential regional supply disruptions and price spikes. The decision underscores the Biden administration's apprehensions regarding fuel prices, with polls highlighting inflation and the economy as key vulnerabilities for the President's 2024 re-election bid.
Governors from eight Midwestern states had petitioned the Environmental Protection Agency (EPA) last year to authorize the year-round sale of gasoline blended with 15% ethanol, aiming to address elevated pump prices following Russia's invasion of Ukraine in February 2022. While the EPA proposed approval of the governors' request in March 2022, the agency missed subsequent deadlines to finalize the proposal. Oil refiners, including HF Sinclair Corp and Phillips 66, raised concerns about the logistical complexities and the potential for spot shortages associated with a fragmented approach to approving E15 sales.
Gasoline in the U.S. typically contains 10% ethanol, and the move to increase ethanol blending is seen as a strategy to lower prices, as ethanol is cheaper by volume than gasoline. The ethanol industry has long advocated for lifting restrictions on E15 sales nationwide, disputing environmental concerns over smog during the summer months.
The delay prompted legal action, with Nebraska and Iowa suing the EPA in August for missing statutory deadlines on the governors' request. The EPA, in its October response, neither denied nor explained the missed deadlines.
The oil and ethanol industries have presented conflicting studies on the impact of E15 sales, with oil-backed studies indicating potential price increases and ethanol-backed studies asserting that any price increases would be offset by utilizing lower-cost ethanol. University of Houston energy economist Ed Hirs noted the vulnerability of the White House and Biden's re-election campaign to accusations that approving the governors' requests led to fuel price spikes, irrespective of other contributing factors. The concern revolves around the public's limited understanding of oil markets and the historical association between high gas prices and voter sentiments.
