NCPA - National Center for Policy Analysis

The Cost of the Renewable Fuel Standard to Motorists

March 16, 2015

Crude oil prices are dropping and Congress now wants a 15-cent increase in the federal gasoline tax, which currently stands at 18.4 cents per gallon. This increase would be in addition to the Renewable Fuel Standard (RFS), a hidden tax that Congress could repeal. Lawmakers argue the gas tax has not kept pace with inflation and in order to keep the Highway Trust Fund in the black, increased revenues are needed.

A recent study from the Manhattan Institute found:

  • The RFS has been in effect since 2007 and requires fuel retailers to blend corn ethanol into the gasoline they sell.
  • American motor­ists pay more than $10 billion per year in extra fuel costs above what they would have paid if they had purchased gasoline alone.
  • Since 1982, on aver­age, ethanol costs 2.4 times more than an energy-equivalent amount of gasoline.
  • Ethanol-blended gasoline has lower energy density than pure gasoline, which means ethanol adulterated fuel renders poor fuel efficiency compared to its non-adulterated counterpart.

Congress has imposed a de facto fuel tax on American motorists by forcing them to consume fuel that is more expensive than gasoline on an energy-equivalent basis. Furthermore, by not eliminating the Renewable Fuel Standard, Congress' regulations prevent ethanol producers from competing in the motor fuel market.

Source: Robert Bryce, "The Hidden Corn Ethanol Tax," Manhattan Institute, March 2015. 


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