Tag Archives: gasoline

Heated debate over whether E15 gas ruins engines


The American Petroleum Institute issued a press release warning motorists about a study of the E15 blend of ethanol and gasoline. Turns out, E15 causes expensive damage to engines:

The additional E15 testing, completed this month, has identified an elevated incidence of fuel pump failures, fuel system component swelling, and impairment of fuel measurement systems in some of the vehicles tested. E15 could cause erratic and misleading fuel gauge readings or cause faulty check engine light illuminations. It also could cause critical components to break and stop fuel flow to the engine. Failure of these components could result in breakdowns that leave consumers stranded on busy roads and highways. Fuel system component problems did not develop in the CRC tests when either E10 or E0 was used. It is difficult to precisely calculate how many vehicles E15 could harm. That depends on how widely it is used and other factors. But, given the kinds of vehicles tested, it is safe to say that millions could be impacted.

In 2010 and 2011, EPA gave the green light to use E15 – the 15 percent ethanol gasoline blend – in model-year-2001-and-later cars and some other vehicles. EPA’s action was irresponsible. EPA knew E15 vehicle testing was ongoing but decided not to wait for the results. Why did EPA move forward prematurely? Part of the answer may be the need to raise the permissible concentration level of ethanol so that greater volumes could be used, as required by the federal Renewable Fuel Standard. Most gasoline sold today is an E10 blend, but rising volume requirements under the law can’t be met much longer without going to higher blends. When Congress passed the law, it could not know it was creating this problem. Today we know. The answer is to repeal the RFS before it puts millions of vehicles and many motorists at risk.

The Coordinating Research Council’s initial tests — first released in May of 2012 — are once again coming to light after further testing proved that delicate components in newer cars were most at risk.

AAA, the recognizable and leading auto club in the U.S., also called for an outright suspension of E15 earlier this month, citing a lack of research:

The Environmental Protection Agency (EPA) and gasoline retailers should suspend the sale of E15 gasoline until more is done to protect consumers from the potential for costly auto damage and voided warranties.

Research to date raises serious concerns that E15, a fuel blend consisting of 15 percent ethanol and 85 percent gasoline, could cause accelerated engine wear and failure, fuel system damage and other problems such as false “check engine” lights.

The potential damage could result in costly repairs for unsuspecting consumers. This is especially tough for most motorists given that only about 40 percent of Americans have enough in savings to afford a major auto repair.

In June, the EPA approved the use of E15, and a handful of gas stations in Nebraska, Iowa and Kansas have begun to sell this fuel. There is a strong likelihood that retailers will market E15 in additional states soon unless regulators take immediate action to protect consumers.

Nearly all of the gasoline sold in the United States today is E10, which contains up to ten percent ethanol, primarily produced from corn. The ethanol industry has lobbied hard to increase the amount of ethanol allowed in gasoline as a way to increase sales and help meet the Renewable Fuels Standard.

AAA’s concern with E15 is not about ethanol. In fact, AAA believes that ethanol-blended fuels have the potential to save Americans money and reduce the nation’s dependency on fossil fuels. The problem is that available research, including the EPA’s exhaust emissions tests, is not sufficient evidence that E15 is safe to use in most vehicles.

Ethanol producers, backed by politicians reaping ethanol lobbying money, fired back by claiming the study by the CRC was rigged. Senior Vice President of the American Coalition for Ethanol (ACE) Ron Lamberty, called out AAA as “hypocrites” and alarmists for “turning a blind eye and most likely allowing people to shorten the lives of their vehicles by using unapproved and untested oil-company produced sub-octane gasoline for decades, while loudly attacking thoroughly tested and approved E15 when only a few stations are offering it for sale, is quite unbecoming for an organization that claims it puts the best interests of the American motorist first.”

Last November in California, E15 was outright banned as an option for motorists because, “it would take several years to complete the vehicle testing and rule development necessary to introduce a new transportation fuel into California’s market.”

The results will no doubt speak for themselves when E15 becomes more widespread at gas stations in other states this year. I for one, will avoid it.

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Ron Paul praises price gouging

Sure, I called it. But isn’t that special when Ron Paul backs me up on simple free market economics:

Had gas stations been allowed to raise their prices to reflect the increased demand for gasoline, only those most in need of gasoline would have purchased gas, while everyone would have economized on their existing supply. But because prices remained lower than they should have been, no one sought to conserve gas. Low prices signaled that gas was in abundant supply, while reality was exactly the opposite, and only those fortunate enough to be at the front of gas lines were able to purchase gas before it sold out. Not surprisingly, a thriving black market developed, with gas offered for up to $20 per gallon.

With price controls in effect, supply shortages were exacerbated. If prices had been allowed to increase to market levels, the profit opportunity would have brought in new supplies from outside the region. As supplies increased, prices gradually would have decreased as supply and demand returned to equilibrium. But with price controls in effect, what company would want to deal with the hassle of shipping gas to a disaster-stricken area with downed power lines and flooded highways when the same profit could be made elsewhere? So instead of gas shipments flooding into the disaster zones, what little gas supply is left is rapidly sold and consumed.

Governments fail to understand that prices are not just random numbers. Prices perform an important role in providing information, coordinating supply and demand, and enabling economic calculation. When government interferes with the price mechanism, economic calamity ensues. Price controls on gasoline led to the infamous gas lines of the 1970s, yet politicians today repeat those same failed mistakes. Instituting price caps at a below-market price will always lead to shortages. No act of any legislature can reverse the laws of supply and demand.

History shows us that the quickest path to economic recovery is to abolish all price controls. If governments really want to aid recovery, they would abolish their “price-gouging” legislation and allow the free market to function.

It’s a shame that RINO governor Chris Christie won’t listen to free market advocates, but he’ll be listening when citizens hit the voting booth next year and remember his handling of gas shortages by further exacerbating the situation with rationing. Even worse, they might remember him giving the green light to football fans to attend a Giants football game during said rationing and state of emergency. Or, they might remember that Christie was quick to send an army of 45 bureaucrats out to check gas station receipts.

Already polls are showing Governor Christie rather vulnerable against Democrat contenders (who most certainly would have also rationed gas, but go ahead and ask them yourselves). Hurricane Sandy and his mishandling of the aftermath have yet to be factored into these polls.

Gas rationing may have ended in New Jersey today, but the extended gas crisis’ actual costs to the New Jersey economy will no doubt haunt Christie well into next year’s re-election bid.

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Post-Sandy price gouging laws and gas shortages

Yesterday, Matthew Iglesias at Slate warned us that many people living in states suffering from the freak storm Hurricane Sandy will find themselves in dire shortages as the free market gets tangled with price gouging laws:

Even in these polarized times, there are some things politicians of both parties can agree. Price gouging, for example, is wrong. New York Attorney General Eric Scheiderman, a Democrat, wants you to know it. But this isn’t just for soft-hearted liberals. New Jersey’s notoriously tough conservative governor, Chris Christie, also put out a weekend press release warning that “price gouging during a state of emergency is illegal” and that complaints would be investigated by the attorney general. Specifically, Garden State merchants are barred from raising prices more than 10 percent over their normal level during emergency conditions (New York’s anti-gouging law sets a less precise definition, barring “unconscionably extreme” increases).

The bipartisan indignation is heartening, but there’s one problem. These laws are hideously misguided. Stopping price hikes during disasters may sound like a way to help people, but all it does is exacerbate shortages and complicate preparedness.

The basic imperative to allocate goods efficiently doesn’t vanish in a storm or other crisis. If anything, it becomes more important. And price controls in an emergency have the same results as they do any other time: They lead to shortages and overconsumption. Letting merchants raise prices if they think customers will be willing to pay more isn’t a concession to greed. Rather, it creates much-needed incentives for people to think harder about what they really need and appropriately rewards vendors who manage their inventories well.

Today, gasoline is in short demand as retailers who were able to stay open are prohibited from adjusting prices in the face of inflated demand:

Drivers and homeowners scrambled to secure fuel for their cars and generators in the U.S. Northeast on Wednesday as storm-hit gasoline stations started to run dry.

More than half of all gasoline service stations in the New York City area and New Jersey were shut because of depleted fuel supplies and power outages, frustrating attempts to restore normal life, industry officials said.

Reports of long lines, dark stations and empty tanks circulated across the region. Some station owners were unable to pump fuel due to a lack of power, while others quickly ran their tanks dry because of increased demand and logistical problems in delivering fresh supplies.

Being able to adjust prices to reflect market conditions isn’t price gouging, it’s good economic sense.

As economist Art Carden eloquently wrote in 2011, “[I]n post-disaster situations rising prices perform vital economic triage by showing which uses of resources are now high-value and which uses of resources are now low-value.”

“A disaster means a big shock both to what people want and to the resources available to fulfill those wants. Freely-moving prices make sure resources are allocated to their highest-valued uses, and rising prices send people a very important signal: resources have gotten scarcer and need to be conserved. If houses are destroyed by a tornado, rising lumber prices tell someone in an unaffected area to think twice about building a new deck because the lumber is probably more valuable rebuilding houses. Rising gas prices tell people to think twice about burning scarce gas for a Sunday drive in the country. And so on.”

In other words, temporarily higher prices would encourage those not directly involved in cleanup to stay home and out of the way until the economy stabilizes.

But with price gouging laws, your desire to drive around looking at a storm’s destruction is just as valid as the crews who are working to clean it up, and makes the overall economic situation that much more painful, for a longer period.

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EPA trying to enforce minimum “E15″ gas purchases

What’s the best way to get people to stop bitching about ever-higher gas prices and their fallout in the ethanol market? The EPA seems to think it’s to just jack up the minimum amount people are allowed to buy — to four gallons:

With prices at the pump worrying Americans, Republicans have railed against the Environmental Protection Agency’s new gas mandate that requires consumers to buy at least four gallons when purchasing from stations with hoses containing 10 percent and 15 percent ethanol-blended fuel.

On Monday, Republicans on the House Committee on Science, Space, and Technology sent a letter to Environmental Protection Agency Chief Administrator Lisa Jackson criticizing the agency’s approval of the sale of gasoline containing 15 volume percent ethanol.

Specifically, the EPA will require that consumers purchase a minimum of four gallons when buying from a gas station that sells gasoline containing 10 percent ethanol and 15 percent ethanol — also known as “E15″ — out of the same gas pump.

A black market will undoubtedly emerge for people who just need less than four gallons. I look forward to seeing the skeezy onesies pushers, stinking of petroleum as they rush to your car with liters of gold liquid sloshing around in their large jackets.

Ultimately, the EPA will have only themselves to blame when customers find themselves caught between two unfree markets (the gas station tasked with enforcing silly federal laws and the bootleggers ignoring them) and it starts to slowly dawn on them who the lesser of two evils really are in that hilarious instance.

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