Flex Fuel Fuzzy Math

The American Spectator
By Eric Peters
Published 6/28/2006 12:06:42 AM

The sticker looks mighty tempting -- a full-size, seven-passenger SUV with a V-8 engine rated at a hybrid-like 33 mpg!

Too bad it's a sham.

Unfortunately, the shuck and jive isn't well-known, or apparent to consumers -- who might be gulled into believing they're helping cut down on energy consumption (and saving the planet to boot) when in fact all they're doing is supporting the latest government boondoggle for the sole and exclusive benefit of the politically powerful ethanol lobby.

Here's how it works:

Under the cover of promoting "renewable" energy, the federal government has put into place a loophole in its Corporate Average Fuel Efficiency (CAFE) requirements that distorts the truth about a vehicle's actual mileage capability -- if it's a vehicle made to run on both gasoline or a gasoline-ethanol blend known as E85. Such "flex fuel" vehicles are credited with much higher miles-per-gallon capability than they actually get -- on the theory that when they burn E85 they are using less gas. Thus, a full-size, V-8 powered SUV like the GMC Yukon is rated at 33 mpg for CAFE purposes -- when in fact it only gets 15 mpg in city driving and 20 mpg on the highway. (It actually gets less when running on E85, since alcohol-based fuel contains less energy per gallon equivalent than straight gasoline.)

As a result of this smarmy loophole, GM, Ford, and other automakers have been given a strong incentive to build large numbers of E85-burning "flex-fuel" vehicles -- vehicles that might not make the CAFE cut otherwise and thus be less economical to produce. (Failing to meet CAFE standards results in fines and "gas guzzler" surcharges, etc.)

But the idea is to create market demand for the heavily-subsidized ethanol industry -- not produce more fuel-efficient vehicles. According to a New York Times piece by Thomas Friedman, the E85/CAFE loophole "increased U.S. oil consumption by 80,000 barrels per day in 2005 alone." GM has built some 2 million flex-fuel vehicles -- many of them large trucks and SUVs that would otherwise be subject to gas-guzzler fines, absent the clever accounting tricks.

The ethanol lobby has also been aggressively pushing its product on the supply end -- via a proposal that's been floated in Washington to require E85/ethanol pumps be installed at service stations -- in effect, forcing oil companies to subsidize the product of a direct competitor. (And of a product that is itself already heavily subsidized on multiple levels.) Stations would have to invest in new tanks/pumps and so on -- much if not all of it on their own nickel.

It would be the equivalent of mandating that McDonald's sell Wendy's burgers -- or that Ford dealers set aside a portion of their new car lot to sell GM vehicles. Pretty nutty. And at odds with basic principles of a free market. Why should gas stations (or anyone else) be compelled to sell a product they might not want to? In particular, one that is produced by a rival industry that already benefits from generous government protection?

This, however, seems to be the only way the ethanol lobby can do business in the U.S. -- a consequence of the fact that E85 costs a relative fortune to make, uses oil in its production (everything from the petroleum-sourced fertilizers used to grow the corn to the plants, trucks and other infrastructure involved), and contains less energy per gallon equivalent than still-cheaper regular unleaded. These factors have rendered it a tough sell on the free market. But the free market is not what the ethanol lobby is interested in.

E85 may have a role to play in reducing our country's dependence upon foreign oil. But it shouldn't be over-sold, let alone forced down our throats -- or given special loopholes that encourage circular results such as the production of large numbers of especially fuel-inefficient vehicles like "flex fuel" SUVs and pick-ups.

Such Enronesque fuzzy math CAFE accounting isn't fooling anyone.


Eric Peters is an automotive columnist and author of Automotive Atrocities: Cars We Love to Hate (MBI).