A Look at How The Energy Crisis of the 1970’s Propelled Ethanol Back Into The Fuel Market
1978-1979 were significant years in the history of fuel ethanol. During these years the Iranian Revolution had gone underway, and during November of 1978 a strike led by 37,000 of Iran’s oil refinery laborers led to a significant decrease in oil production (6 million barrels a day to 1.5 million barrels a day). The Shah of Iran Mohammed Reza Pahlavi had to flee the country and U.S. President Jimmy Carter ordered a termination of imports from Iran.
Realizing that the American energy supply was in jeopardy, the U.S. Congress passed the Energy Tax Act that same month. The purpose of this act was to promote energy conservation and to shift American energy away from oil and fuel towards renewable sources of fuel.
Despite passing this act, beginning in 1979 the most significant energy crisis had begun in the U.S., the price of oil had more than doubled ($15.85/barrel to $39.50/barrel) and long lines began to appear at gas stations in fear of a gasoline shortage. However this energy shortage alerted the U.S. public to the need for alternative sources of energy, and would provide more popular support for future alternative energy bills that would be brought before Congress.
Once the Energy Crisis of 1979 subsided the long term benefits of the Energy Tax Act began to take hold. The Energy Tax Act also gave 4 cents a gallon tax exemption on gasoline that contained 10% ethanol, which resulted in the first significant research in developing ethanol for fuel in the U.S. that gone underway in more than fifty years.
Throughout the 1980’s and 1990’s ethanol production grew steadily as E10 became a common fixture in gasoline. It wasn’t until 2005 that ethanol received its next big boost in the market place with the Energy Policy Act. This act provided tax incentives and loans for various forms of energy production including: coal, biofuel, wind, ocean, geothermal, and nuclear energy.
In 2007 the Energy Independence and Security Act (a kind of extension for the Energy Policy Act) was passed and signed into law by George W. Bush. This new act requires automakers to boost fleetwide gas mileage to 35mpg by 2020, offers incentives for the development of plug-in or hybrid vehicles, and that biofuel production increase to 36 billion gallons a year by 2022.
Between 2005 and 2010 (when these two Acts were first passed into law) ethanol production in the U.S. has more than tripled. Ethanol has re-emerged in the market place, and right now ethanol production continues to be encouraged by the government and U.S. consumers with the recent mandate by the EPA to increase the amount of ethanol in gasoline from E10 (10% ethanol) to E15 (15% ethanol), and by the Obama administrations plans to install an additional 10,000 flex fuel pumps throughout the U.S. over the next 5 years.
Sources:
The Energy Policy Act:http://www.doi.gov/pam/EnergyPolicyAct2005.pdf
The Energy Independence and Security Act (CRC Report to Congress) a summary of the bill http://assets.opencrs.com/rpts/RL34294_20071221.pdf
http://www.agjournalonline.com/news/x1798431020/USDA-to-fund-more-blender-pumps
http://www.davemanuel.com/investor-dictionary/1979-energy-crisis/












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