Reject the E15 Mandate

Published December 11, 2014

On Monday, the City Council’s Committee on Finance voted to approve an ordinance mandating gas stations sell gasoline blended with 15 percent ethanol, also called E15. Chicago gas stations already sell E10—gasoline with a composition that’s 10 percent ethanol. Should the City Council and the mayor approve the committee’s recommendation, Chicago would be the first major city to enforce such a requirement.

After the vote, Committee Chairman Ald. Ed Burke (D) said, “Should it become law, it’ll make Chicago the leader in the area of trying to give consumers cheaper fuel and provide cleaner air for the people that breathe in big cities. I think that it will be precedent-setting and will set the standard for the nation.”

Ald. Anthony Beale (D) echoed a similar statement after the vote, saying, “I look forward to the full council vote and to giving Chicagoans a cleaner, less expensive option.”

Such sentiments lead one to wonder why, if ethanol is such a superior motor fuel, we need a law forcing gas stations to sell it. The costs, after all, are exorbitantly high. According to the Illinois Petroleum Council, gas station owners could be forced to pay up to $100,000 to retrofit their storage tanks and other fuel infrastructure equipment to handle E15. Clearly, owners don’t believe E15 sales can make up for those costs, which indicates Chicagoans aren’t all that excited about buying the fuel.

Their apprehension is justified: The U.S. Environmental Protection Agency says your car, SUV, or light-duty truck has to be a 2001 or newer model to use E15. That’s a relatively small market of vehicles for whom the City Council may require you to build whole new pumps, with no assurance they will use them anyway.

But the law would reduce air pollution, right? Wrong. A 2011 report from the National Academy of Sciences said the very opposite: “production and use of ethanol as fuel to displace gasoline is likely to increase such air pollutants as particulate matter, ozone, and sulfur oxides.” The scientific picture for ethanol’s greenhouse gas emissions doesn’t look much better. A September 2013 paper in the peer-reviewed journal Climatic Change found per unit of energy, the CO2 emissions from burning ethanol are just 2 percent lower than those from gasoline, an insignificant amount considering the economic and environmental harm the higher blend will cause.

The final principal claim E15 boosters make when arguing for increased ethanol use at the expense of gasoline is that it would reduce dependence on foreign oil and keep dollars “in Illinois.” This might actually be E15 supporters’ weakest case. The primary ingredient in gasoline is crude oil, which is used for myriad other products other than gasoline, many of which have significantly greater demand growth than gasoline (where demand is always flat). Therefore, marginally decreasing gasoline use will have no impact on reducing oil use or oil imports—nor will an increase in ethanol use, as the entire fleet of U.S ethanol production is only capable of replacing 0.67 percent of the world oil supply, according to MIT economists, which again is nowhere near what is required to affect oil prices.

Booming U.S. oil production, by contrast, has played a major role in boosting global supply and lowering prices at the pump to four-year lows—thanks to the widespread use of hydraulic fracturing and horizontal drilling, which primarily came about as a response to high oil prices. Today, Chicago gas prices are approximately forty cents cheaper per gallon than they were in the past year, an enormous windfall for small business owners, Christmas shoppers, or anyone who drives a car.

The supply-induced drop in gas prices demonstrates how people can respond to market signals with innovation and technological breakthroughs far better than government mandates can ever require. If the City Council wants to “set a precedent,” it can do something really innovative (for them, anyway) by rejecting this heavy-handed mandate that would impose a great burden on Chicagoans without offering any benefits.