Queenslanders warned of impending costs/ risks as ethanol mandate bill enters Parliament

20 September 2015

With a bill requiring 20% of all Regular Unleaded Petrol (RUP) sold in Queensland to be blended with ethanol entering state parliament last week, it is timely to remind Queenslanders of a few telling facts regarding the issue.

Australian Lot Feeders’ Association (ALFA) President, Don Mackay stated that the legislation is poor Government policy with numerous reasons why it shouldn’t proceed.

  1. No Regulatory Impact Statement outlining that the legislation has a net benefit to the state has been completed. This is because a cost benefit analysis would undoubtedly have determined that the policy has no net benefit as has been found in NSW, Victoria, WA and by the Federal Government;
  2. Engine owners in the state will be worse off as ethanol has corrosion and moisture attraction policies (leading to damage to small, marine and motorbike engines along with 15% of cars) whilst the bowser discount for E10 against RUP for owners of E10 compatible engines has historically never offset its inferior fuel economy;
  3. Ethanol mandates lead to increased food prices for consumers given 57% of the state’s ethanol is produced from grain. With the mandate forcing grain and molasses towards fuel not food production, it will artificially drive up beef, dairy, chicken, pork and egg prices (as grain is on average the highest cost of production);
  4. Consumers don’t want the product as demonstrated by the 23% decline in E10 demand over the last four years. Accordingly, a mandate which effectively forces fuel retailers to blend E10 with RUP when consumers don’t want the product makes no policy or economic sense;
  5. They don’t work. The ethanol industry has received nearly $1 billion worth of Government assistance and protection since 1980 yet there are still only 3 ethanol producers in Australia, ethanol comprises only 1 per cent of Australia’s total road transport fuel mix; and there is declining not increasing demand for the product;
  6. It will assist the sugar cane and grain industries whilst imposing an effective tax on the more numerous producers in the beef, dairy, chicken, egg and pork industries (given grain and molasses prices will increase due to the mandate, particularly during low production years);
  7. The supposed regional development, environmental and fuel security benefits of the mandate are negligible at best, and come at a cost to millions of food and fuel purchasing consumers, engine owners, livestock producers, fuel wholesalers/ retailers and tax payers.

Don Mackay said “with the above statements being irrefutable, it will be interesting to see what the Queensland Government will say in their communication program aimed at dispelling the so called ‘myths’ surrounding ethanol”.

“Whilst the bill allows the mandate to be suspended if there is a shortage of ethanol (for instance during a drought), the damage by way of artificially higher grain and molasses prices to livestock producers will already have been done” Don Mackay said.

“No industry should have a Government imposed demand for its product, particularly when consumers don’t want it, mandates increase food and fuel prices and the policy costs will likely outweigh any purported benefit” Don Mackay added.

“The Qld ethanol mandate will provide benefits to only two ethanol producers in the state yet will negatively impact upon millions of food and fuel purchasing consumers, engine owners, livestock producers, fuel wholesalers/retailers and tax payers – it should not therefore proceed” Don Mackay concluded.

Further information:

Don Mackay
President – ALFA
Mob: 0408-482-737

Dougal Gordon
Mob: 0414-495-368