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What is the Ethanol Cliff

The term “ethanol cliff” refers to an EPA mandate that refiners use a certain

volume of ethanol in their gasoline each year. For 2013, the proscribed volume is 13.8

billion gallons. If ethanol actually worked as advertised and if it were more efficient to

produce ethanol, this may not be such a bad thing. The problem is that most

manufactures state that an ethanol level in excess of 10% will cause engine damage in

most vehicles. (E85 vehicles which can use a fuel mix that contains up to 85% ethanol are the most obvious exception.) If refiners were to meet the

EPA mandate of using 13.8 billion gallons of ethanol and have ethanol constitute no

more than 10% of their fuel, they would have to produce 138 billion gallons of fuel. In

2011, 134 billion gallons of fuel were produced, and due to the bad economy and the fact that fleetwide fuel economy are improving, the number of gallons of fuel produced has been shrinking. Refiners are left buying credits to make up for the mandated

ethanol content that they cannot place, and they are forced to subsidize ethanol exports because there is no domestic market. Worse, the fact that more ethanol than the market can absorb must be produced artificially drives up corn prices and thus the cost to produce of all products in which corn is an ingredient. drives up the cost to produce all other

products in which corn is an ingredient. What do you think? Read the articles that we

posted on Facebook, and let us know your thoughts. Thanks.