Congress Fights For Higher Gas Prices
Two members of the United States Senate are obstructing the Trump Administration’s bipartisan effort to provide relief to middle class families and the nation’s small refiners.
Republicans and Democrats alike – including Gov. John Carney (D-Del.), Sen. Ted Cruz (R-Texas), Sen. Pat Toomey (R-Penn.), and Gov. Tom Wolf (D-Penn.) – have called for regulatory relief from the Renewable Fuel Standard’s Renewable Identification Number’s (RINs) mandate because it unfairly transfers wealth from Main Street to Wall Street. Although the law was created with good intentions, its current form is crony capitalism and a far cry from putting America’s interests first.
The White House has taken note, which is why two meetings were held last week with four Republican senators to discuss a RINs reform plan that EPA Administrator Scott Pruitt and Agriculture Secretary Sonny Perdue recently put together. Reportedly, one more meeting may occur this week.
Unfortunately, two senators have thus far refused to entertain any serious measure of compromise, seemingly out of fear of upsetting their donor base. The top donor to both senators’ PACs is the agribusiness industry – the one special interest group that serves to benefit from the RINs program. But while they swim in windfall profits, the rest of the nation – particularly Main Street – suffers.
Here’s how the law works. In 2007, the government mandated that American refiners mix a fixed amount of ethanol and biofuel into the nation’s fuel supply annually. This regulation was sold to the public as a means of artificially jumpstarting the economy by increasing business for corn farmers. But, like all government stimulus ideas, this one has had severe unintended consequences for the average Jane and Joe.
Washington bureaucrats understood that some refiners could have difficulty hitting their quota, so they gave them the option of purchasing RINs credits in lieu of doing their own mixing. Every gallon of gas mixed to the government’s satisfaction receives a RIN. If a refiner produces more than required of them by law, they can trade their extra credits on the open marketplace.
What the government didn’t realize was just how many refiners would be unable to meet this ethanol mixing requirement themselves for cost and logistical reasons. As a result, there is an unsustainable demand for these extra RINs credits, hence driving up their price. Refiners have had no other recourse than to pass these added costs onto American vehicle owners, whether directly through raising pump prices or indirectly by making cuts to research & development programs that lower consumer costs.
The larger problem is that these large refiners can sell their surplus RINs to anyone, not just refiners in need. In fact, Wall Street bankers, international hedge funds, and other investment houses can buy RINs. As stated by The New York Times, “Traders for big banks and other financial institutions…amassed millions of the credits just as refiners were looking to buy more of them to meet an expanding federal requirement.” Naturally, this unregulated, speculative market has made the price of RINs skyrocket even further. Although costing a nickel or less at the start of the program, they now trade at close to – and sometimes more than – a dollar.
RINs now cost double some refiners’ payroll costs. Refiners are spending more on RINs than literally anything besides crude oil. Now, price hikes and other budgetary cuts are not even enough to save many from bankruptcy. Small refiners are nearing insolvency one by one, threatening thousands of Middle Class jobs in the process.
Clearly, something needs to be done to fix this mess. This week, the Trump administration and its Republican allies showed their flexibility with the corn-state senators that desire to retain the status quo. Among the compromise solutions discussed was keeping the program in place but imposing a 10-cent price cap on the RINs credits to get Wall Street speculators out of the market. Although this proposal should have been noncontroversial, Sens. Grassley and Ernst still said no deal, making the future of these small refineries uncertain.
Given that analysts project the price of gas to rise to the highest it’s been in years by December, now is the time for our members of Congress to reach an agreement with the White House, not obstruct the process.
The White House’s commitment to finding common ground is laudable, but relief for Main Street should not be held hostage if comprise with the do-nothing Congress proves impossible.
The EPA can and should still do what it can to protect Middle America’s jobs and the working class’s pocketbooks. While the Agency’s statutory authority may not fix every problem associated with RINs, its actions would still be of immense help.
America’s manufacturing sector has struggled for far too long. Now is the time to provide the relief the industry needs and deserves, not look the other way to preserve the bottom line of one special interest group.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.