A bipartisan group of senators introduced legislation Thursday to fully repeal the federal ethanol mandate, which has been blamed for increasing fuel and food prices.
The federal Renewable Fuel Standard, which is run by the Environmental Protection Agency, has come under increased congressional scrutiny after the agency denied states waivers from the program last year. Skyrocketing ethanol credit prices earlier stoked fears that the refining industry was reaching the ethanol blending limit.
“The Renewable Fuel Standard is fundamentally broken and beyond repair,” said Wyoming Republican Sen. John Barrasso. “Instead of delivering meaningful environmental benefits, it’s driven up food and fuel costs for American families. This flawed program will also inevitably lead to widespread lawsuits against American manufacturers. When Congress enacts bad policy, the right response is to scrap it and start over.”
The RFS was created in 2005 and requires refiners to blend a certain amount of ethanol into the fuel supply. In 2007, the RFS was expanded and refiners were required to blend larger ethanol volumes into the fuel supply.
Demand for gasoline has fallen due to more fuel efficient vehicles and the recession, which put pressure on refiners who are reluctant to blend more than 10 percent ethanol into the fuel supply. The EPA requires that refiners blend 13.8 billion gallons of ethanol into the fuel supply, but Bloomberg reported in March that refiners will fall 400 million gallons short of that requirement.
“The Renewable Fuel Standard isn’t working for consumers, refiners or livestock groups,” said Arkansas Democrat Sen. Mark Pryor. “These mandates are unworkable and need to be overhauled. Repealing the RFS will allow us to develop a new policy for advanced biofuels without driving up Arkansans’ gas and food prices.”
The RFS has also been blamed for raising food and fuel prices. Opponents argue that the mandate leads to higher feed prices for livestock, which in turn causes the prices of other food products, such as milk and eggs, to increase as well.
Since January, prices of renewable fuel credits — which refiners can purchase to meet their blending requirements — have increased more than 1,000 percent, according to Barrasso. This was passed onto consumers. High renewable fuel credit prices are also an indicator that refiners are nearing the “blend wall” — the point at which no more ethanol can be safely blended into the fuel supply.
“The RFS has proven its worth time and time again. It creates jobs, reduces America’s dependence on foreign oil, lowers the price of gasoline and most importantly gives consumers choice at the pump,” said Bob Dinneen, president and CEO of the Renewable Fuels Association.
However, a study by NERA Economic Consulting found that the RFS could cause fuel rationing. The study also estimated it could eventually drive up the price of diesel by 300 percent and the price of gasoline by 30 percent.
“Ethanol and other renewable fuels have an important role to play in our transportation fuel mix and will continue to be used after Congress repeals the mandate,” said Jack Gerard, president of the American Petroleum Institute. “But we cannot allow a mandate for ethanol that exceeds what is safe for automobiles and that could put upward pressure on fuel prices.”
There are also concerns that higher level blends of ethanol could be damaging to some automobile engines. A study by the Coordinating Research Council found that fuel with a 15 percent ethanol blend could harm fuel systems in millions of model year 2001 and newer vehicles.
“Choice matters,” Dinneen said. “Right now, we are fighting tooth and nail to introduce more choice into a market that is dominated by the petroleum industry. Repealing the RFS is not the answer because the problem lies with the lack of choice caused by market domination by the petroleum monopoly.”
“I promise you, Senator Barrasso’s proposal will never become law because it is the wrong policy for America, and we will continue fighting for the RFS until the cows come home,” Dinneen concluded.
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