Comment: Sustaining RFS Critical to Market Stability, Energy Security

Source: By Ernie Shea, 25x25 • Posted: Tuesday, May 26, 2015

With the Obama administration poised to announce the long-awaited Renewable Fuel Standard biofuel blending requirements for 2014, this year and next, it’s important to look at the many reasons why this country is pursuing alternatives to petroleum-based transportation fuels.

To start with the most obvious, fossil fuels are finite resources. While there may be debate over how much oil is left in the Earth’s reserves, and just how much of that can be safely extracted without causing irreversible environmental damage, there is no disagreement over the fact that the world is consuming millions of years’ worth of stored carbon in less than two hundred years. At the current rate of production and consumption, recoverable stores will be gone, by the most generous estimates, by the end of this century.

Given the limitations of supply on fossil fuels, the obvious advantage of biofuels is that they are renewable, made from organic materials, including waste, making available a virtually infinite supply of clean, domestically produced fuels.

Because we can grow our own source of transportation fuels, they are much safer to produce when compared to the drilling and other activities tied to the extraction of oil. As their name suggests, biofuels are biodegradable, making them much less toxic than oil, especially when considering catastrophes like the BP spill in the Gulf of Mexico five years ago.

And has been demonstrated by research and studies from the private and public sectors including the Department of Energy’s national laboratories, using biofuels to accelerate the transition of transportation fuels to higher octane/lower carbon fuel blends will significantly lower emissions of greenhouse gases and toxic pollutants resulting from petroleum gasoline use.

The fact that consideration is even being given to reducing the amount of biofuels to be blended in our nation’s transportation fuels is the result of a number of causes, not the least of which is the undue influence of the oil industry, which is seeking to maintain a virtually monopolistic hold on the market. While the oil industry claims there is not enough demand for gasoline to satisfy the biofuel requirements set by the RFS, the biofuel industry claims oil companies have failed to meet infrastructure demands set by law when the RFS was reauthorized by Congress in 2007.

Another factor for weakening the RFS offered by some is a general complacency over the issue due to low oil prices and, as a result, some of the lowest prices seen at the gas pump in years. After $100-plus for a barrel of oil and gasoline running from $3-$4 per gallon, the steep drop in prices over the past eight months have, in the opinion of some, lulled consumers – and policy makers – into a sense of economic relief.

But a report issued last week by the Global Commission on the Economy and Climate suggests that the low prices are a distraction that could divert the attention needed to meet future energy needs. Simply put, oil prices continue to bring with them a high degree of volatility that will pose a much bigger challenge to long-term energy market stability and could undermine a transition to clean energy.

The report says that overall, cheaper oil does provide a stimulus to the world economy, but with uneven effects. The world now uses 90 million barrels per day, so an oil price of $60 per barrel instead of $100 would save consumers $1.3 trillion per year. But the authors warn that countries cannot bank on future low fossil fuel prices, and while it is tempting to think lower prices are here to stay, history tells us that large price swings are a poor guide to what happens next.

And the volatility in oil prices hurts the economy. The market value of oil is 5 percent of world gross domestic product. Given that oil’s price can move by 50 percent within a matter of months, there are few short-term options to reduce consumption, and it has widespread knock-on effects on other key inputs to economic activity. Energy price volatility delays business investment, requires costly reallocation of resources, reduces consumer expenditures and slows job growth.

Despite low oil prices now, there are good reasons to continue to expand investments in renewable energy. The long-term focus still favors steps to reduce dependence on fossil fuels, including support of renewable sources of fuel and power (which would also reduce GHG emissions), along with increasing energy efficiency.

The White House is strongly urged to recognize the volatility of oil prices and the contributions that expanded use of biofuels can make to achieving national GHG emission targets when it releases the 2014-2016 RFS blending requirements in the next week or so. Reversing the course set out by the RFS eight years ago will compromise national and energy security, negatively impact the economy, cost U.S. jobs, endanger public health and derail the commercial scale production of advanced biofuels.