In efforts to ‘do something’ about energy affordability and ease prices at the pump, Congress is attempting to make E15 fuel blends available year-round with new legislation, claiming it will save money. But just like many well-intentioned government actions, unintended consequences follow. In this case, repercussions include higher costs for consumers.
The very fuel lawmakers assert will save Americans money has already been propped up through tens of billions of taxpayer funds for decades. Multiple tax credits subsidize biofuels, with the latest expansion expected to cost $53.1 billion over the next decade. More than $800 million has been or will be spent on biofuel infrastructure projects. Other handouts include crop insurance, loan guarantees, grants, and commodity programs.
The corn ethanol industry also benefits from the Renewable Fuel Standard (RFS) that legally requires a set volume of biofuels to be mixed into conventional gasoline, creating a guaranteed market. The federal government is shaping a fuel market through ethanol blend mandates.
These blend requirements have already raised gas prices by approximately 30 cents a gallon, in part because of compliance costs. Due to ethanol’s corrosive properties, it must be transported by truck and blended at distribution terminals. The independent refiners which own few, if any, of these terminals, must purchase the necessary compliance credits (RINs). This extra expense is baked into each gallon of gas before it reaches the pump.
The proposed legislation puts further pressure on small refineries, threatening two of the three refineries in Pennsylvania. Under current law, small refiners can seek 100 percent exemption from blending requirements on account of the severe economic hardship that RFS compliance can inflict. The new bill reduces that to 75 percent. More problematic is redefining “small refiner,” which specifies that the 75,000 barrels-per-day capacity cap applies to all subsidiaries and affiliates of larger parent companies, even if they individually process less than 75,000. In other words, significantly fewer small refineries will qualify.
Pennsylvania has already suffered from refinery hardship.
In 2018 Philadelphia Energy Solutions refinery filed chapter 11 bankruptcy citing “regulatory compliance costs that specifically penalize independent merchant refiners.” When a fire forced its shutdown the following year, more than 1,000 jobs were lost and U.S. refining capacity shrunk by two percent. The closure forced regional markets to pivot toward importing from the Gulf Coast and Europe, leading to temporary price volatility for gasoline and jet fuel.
Small refiners, which may have received exemptions in the past, will now be forced to comply (either partly or completely), significantly increasing their costs. Because the fuel market is highly interconnected, rising aggregate demand for corn ethanol displaces standard petroleum, inflating the cost of RINs and threatening the profitability of smaller operations. It would be unfortunate for another Pennsylvania refinery to file bankruptcy or worse, close.
Inflated fuel costs are only part of the story.
Diverting more corn into the fuel supply leaves less for food and livestock feed, escalating costs which work their way into basic food products and animal agriculture. At a time when households are still grappling with inflation on everyday essentials, higher grocery bills will only increase financial burdens.
All this effort, expense, and potential economic distress will supposedly benefit only a fraction of American consumers. E15 is currently available in about 3,000 of the 145,000 gas stations in the U.S., mainly in corn-belt states. Of Pennsylvania’s 9,500 gas stations, less than 300 offer E15.
Motorists who do manage to secure this higher blend could be in for disappointment. Because pure ethanol has 33 percent less energy content than pure gasoline, vehicles lose fuel economy. E10 already reduces miles per gallon by three or four percent; E15 reduces fuel economy by another one to two percent. Depending on the price differential of the two fuels, consumers will gain very little or nothing at all.
Year-round E15 may sound like a simple affordability measure, but the policy’s real-world effects point in the opposite direction. Decades of subsidies, costly RFS compliance, and pressures on small refiners mean consumers are already paying more for fuel — long before any promised savings materialize. Expanding ethanol mandates would further strain Pennsylvania’s refining sector, raise food and feed prices, and deliver little benefit to the small share of drivers who can even access E15.
Rather than doubling down on a heavily subsidized and distortionary system, lawmakers should pursue reforms that genuinely lower costs for families and strengthen — not weaken — America’s fuel and food supply chains.
Kristen Walker is Senior Policy Analyst and Manager for Energy and Transportation with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.theamericanconsumer.org or follow us on X @ConsumerPal.