What is the summertime ethanol waiver and how will it affect gas prices?

President Joe Biden announced that Americans can use E-15 ethanol to fuel their vehicles this summer. It should cut the price of gas by about 10 to 15 cents per gallon and will make farmers and farm-state lawmakers happy. The average family uses about 90 gallons of fuel per month, meaning this move could save families about 9 bucks a month. A gallon of E-15 cost about 2.8% less than a gallon of E-10.

About 2,300 gas stations around the country (out of a total of 150,000 stations) offer E-15 fuel. Most of them are in the South and Midwest. Gas stations have been unwilling to install E-15 pumps because, until now, the higher alcohol mix has not been terribly popular with drivers.

Ethanol comes from corn and corn comes from places like Iowa and Illinois. Nearly 2,000 Iowans work in ethanol plants.

The president directed the Environmental Protection Agency to grant an “emergency waiver” to allow E-15 fuel. E-15 means the blend is 15% ethanol. Most gasoline sold in the U.S. is E-10, which means it is blended with 10% ethanol. The EPA usually does not allow E-15 gasoline to be sold from June to mid-September because of air quality concerns. President Donald Trump wanted to allow year-round E-15 fuel but a 2019 appeals court ruling overturned that directive.

Think of ethanol as a gasoline additive. In short, when a car burns ethanol-laced gasoline, the alcohol provides oxygen, making gasoline burn more cleanly in engines. Other additives that gas companies have used over time have caused worse pollution than ethanol.

Popular Science explains why E-15 is controversial:

Ethanol, a grain-based alcohol, is controversial among renewable fuel advocates, farmers, environmentalists, and petroleum groups. While ethanol fermented and distilled from corn is considered a renewable fuel because corn growth, which removes carbon dioxide from the air during photosynthesis, offsets carbon dioxide emitted during combustion, its production also takes a sizable toll on the environment. And while ethanol contains only two-thirds the energy of pure gasoline when burned, ethanol use in gasoline is subsidized by the government, to the dismay of oil producers.

Most of the gas we buy does not contain more than 10 percent ethanol, also known as E10. While all cars can run on E10, only specially designed vehicles and passenger cars that are model year 2001 or newer can use E15.

The Clean Air Act currently prohibits sales of E15 in the summer since E15 produces more volatile emissions that go on to form ozone, or smog, than regular blended gasoline. Since the reaction is driven by sunlight, ozone pollution is worse during the hot summer months. Ground-level ozone is an air pollutant that constricts the airways in the lungs, making it harder to breath and exacerbating respiratory conditions including asthma, emphysema, and chronic bronchitis.

The Washington Post adds some other details:

Oil companies have battled it (E15) for years, warning about potential engine damage from motorists inadvertently pumping the fuel into vehicles and other equipment not approved to use it. Some automakers warn that car warranties would be voided if motorists use E15.

Oil refiners worry that increased use of ethanol will pare their share of the fuels market. (This risk is less acute for refiners that also produce ethanol, such as Valero Energy Corp.) Some environmental activists argue that expanding the availability of E15 will drive the production of more corn, resulting in more prairies being plowed and waterways polluted by agricultural runoff.

Popular Mechanics also reminds us that ethanol is a throwback to the early days of car fuel. Ford’s Model T ran on ethanol. Some mechanics say E-15 is corrosive and can damage engines over time.

The EPA regulates the vapor pressure, or volatility, of gasoline through the Reid vapor pressure rating. That pressure rating measures the propensity for gasoline to evaporate and lead to smog. (Read more about Reid vapor pressure here, here and here.)

Winter blends need to have a higher RVP (up to 15.0 psi) for cold engines to operate properly. In summer, lower RVP fuels (down to 7.0 psi) are used to prevent unnecessary evaporation. Those summer fuels use 2% butane to lower the RVP. In the winter, fuels use more butane. Interestingly, typically summer blends provide better gas mileage than winter blends.

Some communities have a lower RVP limit than the rest of the country, mostly because of their altitudes and other atmospheric factors that make them more likely to experience air pollution (smog) problems.

The EPA reminds us that even as it is approved for use this summer, E-15 won’t be for everyone everywhere.

E-15 is available in 30 states. E-10 remains the limit for passenger vehicles older than model year 2001 and for other non-road and small engines and vehicles that use gasoline, such as lawnmowers, motorcycles and boats.

Vehicles approved for E- 15 use include:

• Flexible fuel vehicles
• Conventional vehicles of model year 2001 and newer

Vehicles prohibited from using E-15 include:

• All motorcycles
• All vehicles with heavy-duty engines, such as school buses and delivery trucks
• All off-road vehicles, such as boats and snowmobiles
• All engines in off-road equipment, such as chain saws and gasoline lawnmowers
• All conventional vehicles older than model year 2001

Is the worst inflation over?

The U.S. inflation rate is now running at 8.5% year over year while wages rose 5.6% at the same time. In other words, if you are anything like “average,” you are going backward financially. The key question today is whether the March figures mark the top of the rise or if there is more to come.

There are reasons to think the April figures might be better. Gasoline prices are lower than they were during the time of the Consumer Price Index survey, but a prolonged Russian invasion of Ukraine could easily jack up oil prices again. As it is, fuel prices are 48% higher than a year ago. And just to add one more poke in the eye, oil prices rose again to more than $100 a barrel Tuesday.

Food prices rose a full percent last month, meaning food inflation is running at an 8.8% rate.

The Bureau of Labor Statistics reports, “The index for meats, poultry, fish, and eggs increased 1.0 percent in March, while the index for cereals and bakery products rose 1.5 percent. Dairy and related products index also increased 1.2 percent in March.”

Compared to a year ago, overall food prices are up 10%, the largest 12-month increase since the period ending March 1981. BLS says, “The index for meats, poultry, fish, and eggs increased 13.7 percent over the last year as the index for beef rose 16.0 percent. The other major grocery store food group indexes also rose over the past year, with increases ranging from 7.0-10 percent.”

Restaurant prices rose but not as fast as “food at home.”

Housing prices, including rent, rose 5% in the last year, which is a significant increase considering it is the largest single bill for most households.

Airline fares rose more than 10.7% last month. Used car prices dropped for the second straight month after nearly two years of steady increases.

Inflation hit farmers hard, too

It might be tempting to think that farmers are getting rich these days with a new demand for ethanol and rising food prices. Corn prices are up 11% and wheat prices rose 13% since Russia invaded Ukraine. But don’t forget that farmers use a lot of fuel, and fertilizer costs are sky-high right now.

The Wall Street Journal spoke with Brooks Barnes, a second-generation farmer in Wilson County, North Carolina, about what farmers face:

On his farm where he grows tobacco, corn, soybeans, wheat and sweet potatoes, Mr. Barnes in the spring of 2021 said he paid $16 a gallon for Bayer AG’s Roundup, the world’s most commonly used weedkiller, for his crops. By September he bought it for about $40 a gallon and in February, his Nutrien Ltd. retailer told him it was $60 a gallon, he said. One of the fertilizers he buys, 24s, cost him $500 a ton from $175 last spring, he said. Float bed plastic, which holds water for his tobacco plant trays to float on in his greenhouses, cost him $82 a roll, compared with $70 a year ago.

“I’ve always been excited to start a new crop but I’m not excited at all for this one,” said Mr. Barnes, who has been farming full-time since 2004.

Growers’ biggest expenses each year, including fertilizer and crop chemicals, such as glyphosate, used to kill weeds and other pests are soaring in price. Glyphosate, Roundup’s active ingredient, is up about 250% from what it was 12 months ago, said Dean Hendrickson, vice president of marketing and business development at CHS Inc., a farm cooperative and major retailer of seeds and chemicals.

Bayer attributed the recent increases in glyphosate prices to a global shortage caused by weather events, energy restrictions, high demand for transportation and global supply-chain challenges, a spokeswoman said.

42% of Americans now growing their own food, gardening

One way to fight food inflation is to grow your own. The average American household that plants produce saves around $500 a year (not counting the value of sweat equity).

This backyard gardening boom started during the first year of the pandemic when there was a shortage of some stuff in grocery stores and people were home more often.

A new survey by the National Gardening Association found 42% of Americans have begun growing their own produce. The survey says:

• Covid pandemic created 18.3 million new gardeners, most of whom are millennials.
• 42% of gardeners spent more time gardening during the Covid pandemic.
• Global online sales of gardening goods doubled during the Covid pandemic.
• 55% of American households engage in gardening activities.
• Millennials make up 29% of gardener demographics.
• Millennials have an increasing interest in cannabis cultivation.
• American adults spend $48 billion on lawn and gardening equipment each year.
• Average garden yields $600 of produce in a year.
• 1 in 3 households in the U.S. is growing food.
• Children involved in growing vegetables are more willing to eat them.
• U.S. and Canadian garden centers saw a whopping 65% increase in millennial customer demographics and a 44% increase in generation Z demographics
• 30% of gardeners intend to increase their gardening activities post-pandemic and 59% intend to keep the level of activity the same.
• The average size of an American vegetable garden is 600 sq. ft which is surprising as the median size of an average garden is 96 sq. ft.
• The average garden yields $600 of produce in a year that is roughly $1 per sq. ft.
• When subtracting the $70 spend per household, the average household returns about $530 each year from its garden.

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