CBO predicts higher fuel costs due to renewable mandate

Source: By Timothy Cama, The Hill.com • Posted: Friday, June 27, 2014

Gasoline’s price will increase up to 9 percent, and diesel fuel will rise by up to 14 percent by 2017 because of the Renewable Fuel Standard (RFS) if Congress does not repeal it, the Congressional Budget Office (CBO) said Thursday.

The CBO’s analysis estimated that, in order to comply with the increasing mandates called for under the Energy Independence and Security Act, fuel refiners would have to more than triple their use of advanced biofuels by 2017, and would have to use much more ethanol in gasoline than the 10 percent blend that older vehicles can tolerate.

The agency predicted that the Environmental Protection Agency, which oversees the RFS, will keep the mandate levels similar through 2017, since increasing them “would require a large and rapid increase in the use of advanced biofuels and would cause the total percentage of ethanol in the nation’s gasoline supply to rise to levels that would require significant changes in the infrastructure of fueling stations.”

The CBO’s analysis concluded that, despite a common talking point by RFS opponents, food prices would not likely change much by 2017 if the mandate is repealed. That’s because fuel refiners would find it cost effective to keep using a similar amount of corn-based ethanol, even if the mandate were not there.

But even if the EPA increased the mandate for renewable fuels, food prices would change very little. “Because corn and food made with corn account for only a small fraction of total U.S. spending on food, that total spending would increase by about one-quarter of one percent,” the CBO wrote.

Researchers also found that renewable fuels have little chance of reducing greenhouse gas emissions, unless the country replaces more gasoline and diesel with advanced biofuels.