Can This Little Guy Really Take on the Big Bad Oil Industry? Probably Not.
Everyone loves a good underdog story. The ethanol industry knows this, so that's the image they're trying to paint for themselves in Washington. In a press release for their new campaign, representatives from ethanol trade association Growth Energy said, "We understand we're the little guy. We know we're the underdog. It's David versus Goliath. But the biofuels industry will no longer tolerate misleading information and nor should the American public." Big oil is ethanol's primary enemy in Washington, and they are taking a stand.
The campaign will consist of a series of TV ads and a website, all with the same message: "You're no dummy. Don't let the oil industry treat you like one." This campaign to improve their public image is a tandem effort with their attempts to grow their lobbying presence in Washington.
According to data from OpenSecrets.org, Growth Energy, which is comprised of 80 ethanol plants, as well as numerous other "associates" in the agricultural industry, spent $1.3 million in federal lobbying efforts during 2012, and so far this year has already spent $640,000.
Still, their spending level is nowhere near that of the oil industry. So far this year the American Petroleum Institute has spent $4.1 million in lobbying, and spent $7.3 million last year, making them the 57th largest contributor of lobbying dollars. Ethanol, on the other hand, comes in at the 360th spot.
In terms of lobbying dollars, it's clear that David doesn't have what it takes to defeat Goliath. Especially considering that last year Growth Energy's campaign PAC spent at least $36,300 more than it took in, while API sat comfortably on a cash base from the previous election cycle.
It's also worth consideration that that the product that Growth Energy is trying to sell to lawmakers may not be a desirable one — at least not now. The initial enthusiasm for ethanol as a fuel alternative to gasoline has waned. In 2011, Congress ended the 6 billion per-year Volumetric Ethanol Excise Tax Credit (VEETC), which offered ethanol producers and blenders a 45-cent-per-gallon subsidy. In general, ethanol production has slowed in the past few years. In addition to the market trends, the data about ethanol suggests that it's not the panacea it has been made out to be. Because the majority of ethanol used in the United States comes from corn, it can put a tremendous strain on corn production nationwide. As of last year, 40% of the corn produced in the U.S. went to ethanol. This is a significant portion, especially in times of drought such as the one that happened in the summer of 2012. Such scarcity can drive up food prices.
Another one of ethanol's selling points, its lower cost relative to oil, may not live up to the hype either. When one takes into consideration all of the energy that is consumed in the process of making ethanol, it ends up being more expensive. Popular Mechanics cites Cornell Professor David Pimentel, who’s found that it costs nearly 1.3 gallons of oil to produce 1 gallon of ethanol.
This is not to say that ethanol production is entirely useless, or that it can't become a viable fuel alternative someday. For indeed, the ethanol industry has been a steady job creator so far, and if it can be produced in a better way, the sector will only grow. At present, however, the science, the market, and politics all indicate that the ethanol industry is in no position to overtake the oil industry anytime soon. It's true that alternative fuels need to be explored, and it's true that big oil could stand to loosen its grip on Washington. But ethanol won't be the underdog hero to save the day.