Big Oil ‘rigging’ market against higher blends — ethanol industry report

Source: Amanda Peterka, E&E reporter • Posted: Thursday, July 10, 2014

Big oil companies have been slow to adopt higher blends of ethanol and have contracts that make it difficult for gas station owners to choose those blends on their own, according to an ethanol industry report.

Only 0.6 percent of gas stations branded by the “big five” oil companies — Royal Dutch Shell PLC, BP PLC, Chevron Corp., Exxon Mobil Corp. and ConocoPhillips Co. — currently offer gasoline containing more than 10 percent ethanol, the Renewable Fuels Association said.

Independent, unbranded stations, on the other hand, have adopted higher blends at a rate of between 2.3 and 3.5 percent.

The ethanol group said that the analysis shows that oil companies are blocking the introduction of greater volumes of renewable fuel into the market.

“The big oil companies are rigging the market to take away consumer choice and prevent many retailers from offering these clean, homegrown fuels,” RFA President and CEO Bob Dinneen said.

The group based its analysis on information from the National Association of Convenience Stores and the Department of Energy, among other data sets. It found that only 300 of 48,000 retail gas stations carrying a logo of one of the big five oil companies sold either E15 or E85 — gasoline containing 15 percent and up to 85 percent ethanol, respectively.

Only 475 of the 34,300 gas stations displaying other oil refiner brands sold the higher blends. Of those, Speedway and Cenex accounted for more than half.

Between 1,700 and 2,600 of the remaining 74,000 independently branded gas stations sold either E85 or E15.

The ethanol group argues that introducing higher blends of ethanol into the market would resolve the issue of the “blend wall,” the term used to describe the 10 percent saturation level of ethanol in the market. The great majority of gasoline sold at gas stations today contains that amount of ethanol.

The trade group also accused the oil industry of using the contracts with gas station owners to block more ethanol from entering the market. According to the report, contracts commonly contain exclusivity provisions that allow distributors to only sell fuels made available by the supplier or have costly requirements for selling higher blends of ethanol.

RFA last year asked the Federal Trade Commission to investigate the issue, citing the case of a gas retailer in Kansas, but Dinneen yesterday said that the agency has not shown interest in taking up the matter.

In an emailed response, the American Petroleum Institute noted that consumers are not demanding higher blends of ethanol in their gasoline.

Even Marathon Petroleum Co., which operates Speedway and has 173 stations selling E85, says that lack of consumer demand is a big barrier.

“Based on our extensive real-world experience of going to the market with this fuel, E85 sales have limited growth potential and will not be the silver bullet” for the blend wall issues, Dave Whikehart, director of product supply and optimization at Marathon Petroleum, said at an RFA conference earlier this year (Greenwire, Feb. 25).