White House Mulls Waiving Ethanol Rule

The Obama administration is considering whether to suspend for 2012 a federal regulation that mandates the use of 15.2 billion gallons of biofuel into the nation's gasoline supply.

The issue is the severe drought, which is likely to shrink America's corn harvest the main U.S. source of ethanol to a 17-year low. Corn prices have soared 60% in the past two months because of weather. They have quintupled over the last seven years as ethanol consumption increased.

The United Nations and 180 members of Congress have asked the White House to waive the biofuel rule. They cite concerns about high prices and shortages of corn to feed humans and livestock, which could drive up global inflation. Expensive corn-based ethanol also is raising gasoline prices, analysts say.

The biofuel mandate remains popular in corn-growing states, thus making the decision tricky in a presidential election year.

America grows 40% of the world's corn, and an estimated 40% of the U.S. yield is used to make biofuel. The Dept. of Agriculture predicts farmers this year will harvest 13% less corn than in 2011.

Under a 2007 energy law, the U.S. must use 36 billion gallons of biofuel in gasoline by 2022, up from 5 billion gallons in 2007. By 2022, nearly 60% of the total is expected to be cellulosic ethanol made from waste vegetation.