Show Me Sarah Steelman

Over at the Post-Dispatch, gubernatorial primary hopeful Sarah Steelman participated in a live Q&A session with the readers. Here is one interesting question:

Joe Hodes, St. Louis: Ms. Steelman,

I was inclined to vote for you until I saw your ad on the ethanol mandate. While corn ethanol has been shown to play a tiny part in driving up food prices (far less than foreign demand, oil prices and speculation), it has driven DOWN the cost of gas by 10 cents or more a gallon.

There have been over a dozen studies by universities, economists, researchers and even the energy industry showing that ethanol REDUCES the cost of gasoline–Missouri’s E10 mandate leads MO to have the CHEAPEST GAS in the nation.

Yet you say in your ad that the ethanol mandate has caused gas prices to rise. No one–even ethanol’s other critics–has been foolish enough to make such a counter-factual statement.

How could you get your facts so wrong?

Thanks,

Joe Hodes
St. Louis, MO

The mandate may be keeping the price of gas 10 cents lower than otherwise, but this gain is lost once you take into account the decreased efficiency of ethanol. E-10 fuel is 2.5 percent less efficient than regular gas, meaning it takes more fuel to go the same distance that normal gasoline would allow. If you want to drive 100 miles with a car that gets 20 miles per gallon, with ordinary gas costing $4 per gallon at the pump, it will cost you $20 for 5 gallons.

With E-10, fuel only costs $3.90 per gallon at the pump, but you now need 5.125 gallons to travel 100 miles, costing you $19.99. A paltry savings of one cent. But this analysis so far doesn’t even take into account the ethanol subsidy that Missouri taxpayers pay. That subsidy is currently 51 cents per gallon, and will fall to 45 cents when the new farm bill takes effect. So, it would actually cost you an additional $2.61 to drive 100 miles, but that cost is paid in taxes instead of at the pump. So, it comes to $22.60 for the same trip. If all actual costs were shown at the pump, E-10 would be priced at 41 cents per gallon more than normal gasoline.

Here is Steelman’s response:

Sarah Steelman: The facts speak for themselves. The studies from the Missouri Corn Growers and others don’t take into account the subsidies that we pay on our tax bills for ethanol. Secondly, they don’t take into account the decreased fuel efficiency of ethanol, meaning that you have to fill up your tank more times to go the same distance. I would invite you to read the Show-Me Institute’s recent study on the topic. The Show-Me Institute, unlike other groups, does not have a financial interest in ethanol. The Show-Me Institute study states that the ethanol mandate will cost Missourians over $1 billion over the next decade. This figure doesn’t even take into account the increased price of food caused by the mandate. I am the only candidate willing to stand up against the special interests who forced the ethanol mandate on our state. If ethanol can stand on its own two feet, let it do so in the free market.

Check and mate. The study in question, detailing the real costs involved with Missouri’s ethanol mandate, can be found on the Show-Me Institute website.