The Supreme Court has ignored the nation’s retailers by refusing to hear a case in which retailers say the Federal Reserve allows banks to charge businesses too much in swipe fees, while the big drop in gas prices is an interesting development for ethanol producers and state gas-tax hawks.
Since 2011, we’ve been following this issue through the courts. It’s estimated that banks enjoy price-fixed fees rendering unreasonable margins of 500 to 1,000 percent on debit-card swipe fees. In essence, high fees allowed by the Fed causes retailers and customers to pay far more than was intended by Congress when it passed the financial reforms known as Dodd-Frank.
It’s the end of the line. The court's decision to ignore this important case, pursued by the National Association of Convenience Stores and the National Retail Federation among others, lets stand an earlier federal appeals court ruling upholding the Fed's cap of 21 cents every time a debit card is swiped. The cap has been in effect since Oct. 1, 2011.
This swipe fee battle has gone several rounds. Retailers won in 2013 when the district court ordered the Fed to reduce the fees. The Fed appealed and a three-judge appeals panel upheld the Fed’s rules by reversing the lower court decision. The U.S. Supreme Court was the last stop for the nation’s retailers. The only way swipe fees could become reasonable now is for the Fed to decide to revise the allowable cap. We can stomp our feet and blow a raspberry on that one.
On a lighter note, the dramatically lower price of gas these days has ethanol proponents cringing and state tax hawks salivating.
With gas prices widely below $2, consumers are ecstatic, but not so for the champions of alternative fuels. Fuels containing high amounts ethanol, as well as compressed natural gas (CNG), have had an advantage over the higher-priced E10, which is now considered the traditional petroleum blend under the blend wall. CNG is being hit the hardest because it’s suddenly priced higher than E10. But producers and retailers of E85 (a blend of 70 to 85 percent ethanol) are also starting to feel pain. The nose dive in E85 sales will come because the price difference between E85 and E10 isn’t attractive now. Here’s why:
What ethanol critics have been saying for a long time has finally come to roost — E85 produces less miles-per-gallon efficiency. So while E85 pump prices are still slightly lower than E10, E85 will actually be a disadvantage to drivers and consumers will see it.
Meanwhile, kudos to Sens. Dianne Feinstein, D-Calif., and Pat Toomey, R-Pa., for floating an amendment to the Keystone XL pipeline bill, the “Corn Ethanol Mandate Elimination Act of 2015,” according to the NMMA’s Daily Currents. Sen. Flake, R-Ariz., is a co-sponsor.
As the marine industry has consistently advocated, it would remove the mandate in the Renewable Fuel Standard to blend corn ethanol (15 million gallons annually now, up to 33 million in the years ahead) into gasoline while preserving other renewable fuel mandates, including those for biodiesel and cellulosic ethanol.
According to Feinstein, “This bill is a simple and smart modification of the Renewable Fuel Standard program. Once we remove the corn ethanol mandate, the RFS program can finally serve its intended purpose: to support the development of advanced environmentally friendly biofuels like biodiesel, cellulosic ethanol and other revolutionary fuels.”
The fuel standard is a broken law and requires a long-term fix from Congress. All recreational boating knows firsthand the damage and safety concerns ethanol creates for consumers.
Finally, while Congress appears to be cold to raising the federal gas tax, many state lawmakers see the current low gas prices as a time to consider hiking state fuel taxes to fund road and bridges, USA Today reports.
Governors and/or legislators in South Dakota, Iowa, New Jersey and Utah, for example, are discussing increasing their gas tax. Other states responding to the low gas prices include Georgia which is studying how to raise at least $1 billion more a year to repair its roads and bridges; Tennessee Gov. Bill Haslam has warned that lawmakers must deal with the state's crumbling infrastructure, saying the state’s gas tax was last raised nearly 26 years ago; and in Michigan the legislature approved a plan for a ballot initiative to raise the sales tax to pay for road repairs. Gov. Rick Snyder signed legislation to spend $1.3 billion a year on Michigan roads and transportation infrastructure, but its contingent on voters approving a sales tax increase from 6 percent to 7 percent in May.
Regardless of your opinion about raising gas taxes, observing what happens this year will be interesting.