Renewable fuel credit prices rose to record highs Monday, reigniting the debate over repealing the federal government’s ethanol mandate.
For months now, refiners and the petroleum industry have been pushing for the full repeal of the Renewable Fuel Standard (RFS), which requires that 13.8 billion gallons of ethanol be blended into gasoline this year and 14.4 billion in 2014.
However, refiners are hesitant to blend more than 10 percent ethanol into the fuel supply over safety concerns. Skyrocketing renewable fuel credit prices indicate that the industry is nearing the limits of what it can blend, or the “blend wall.”
“The energy landscape in the United States is markedly different today than it was when the RFS was enacted in 2007,” said Charles Drevna, president of the American Fuel and Petrochemicals Manufacturers. “Today it is clear that the RFS is not only failing to achieve its environmental goals, but is actively undermining them.”
As renewable fuel credit prices increase, refiners are burdened with higher costs. Valero Energy Corporation CEO and Chairman William Klesse said in a Senate hearing that his company expects cost increases between $500 million and $750 million in 2013. Valero is also the third-largest corn ethanol producer in the U.S.
Recently, the American Petroleum Institute (API) launched an ad campaign and a new website in support of repealing the renewable fuel standard.
“By mandating higher ethanol content in gasoline than is safe, the RFS threatens American consumers, the investments they’ve made in their vehicles and our economic wellbeing,’ said API’s downstream director Bob Greco.
“The economic consequences from the continued implementation of the RFS are severe,” Greco added. “A study by NERA Economic Consulting found that, by 2015, the U.S. would see a 300 percent increase in the cost of diesel, and a 30 percent rise in the cost of gasoline.”
But the ethanol industry contends that its product does not drive up the cost of fuels, instead making them cleaner and cheaper.
“This is just more of the same from Big Oil,” said Growth Energy CEO Tom Buis. “They will stop at nothing to maintain their near-monopoly on the liquid fuels market, even if it means saddling consumers with ever increasing prices at the pump.”
Ethanol producers have been pushing for the expanded use of gasoline with a 15 percent ethanol blend, or E15. The EPA approved the use of E15 in 2011, but only a handful of gas stations carry the fuel.
There are concerns that E15 could be harmful to engines, as most cars were only designed to handle 10 percent ethanol blended fuels.
API President Jack Gerard said that “millions of automobiles could face engine and fuel systems damage” from E15 and that the fuel was “an unnecessary risk to consumer safety, automobiles and small engines.”
Republicans on Capitol Hill have been pushing to end the renewable fuel standard, arguing it has raised food and fuel prices. A full repeal bill was recently introduced in the Senate.
“I think we need to get rid of [the Renewable Fuel Standard) and we need to think of a better way to handle this,” Oklahoma Republican Rep. James Lankford told The Daily Caller News Foundation.
“The Renewable Fuel Standard isn’t working for consumers, refiners or livestock groups,” said Arkansas Democratic 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.”
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