Gas prices are beginning to rise in anticipation of hurricane Isaac, directly headed to New Orleans nearly seven years after hurricane Katrina. While evacuation plans were underway in the city, President Obama was in Ames, Iowa and Monte Shaw, the executive director of the Iowa Renewable Fuels Association brought a letter for the president asking him to take emergency action to suspend the federal petroleum mandate for the next four to six week so retailers could use higher blends of ethanol. This would help make up for any lost petroleum production if any refineries should take a hit during the storm.

The letter reads, “With the busy Labor Day weekend right around the corner, the last thing American consumers need is higher gasoline prices – but that is just what they’ll get.  Nearly 80 percent of the daily oil production in the Gulf region has been halted due to Tropical Storm Isaac.  The storm has also shut down the refining operations in the area – 40 percent of America’s entire refining capacity.  According to the National Journal, these operations are expected to be off-line at least two weeks.

Therefore, IRFA is asking you to take emergency action to suspend the federal petroleum mandate for the next four to six weeks. Currently federal law requires that a minimum of 85 percent of every gallon of gas sold in America be from petroleum sources. If retailers sell or consumers buy a fuel blended with less petroleum (i.e. more ethanol) they are subject to a $37,500 per day fine by the federal government.

Due to the current petroleum challenges, if gasoline prices increase by only a modest 20 cents per gallon for four weeks, that equates to a “mandate tax” of over $300 million dollars – more than a quarter of a billion dollars!

According to the Energy Information Administration, there are over 775 million gallons of ethanol in storage today. If provided the regulatory flexibility to do so, retailers could use this ethanol to make up for the lost petroleum production over the next few weeks during this emergency situation.  Not only would ethanol add supply to the market, but ethanol is already less expensive than gasoline.”