Refiners and Ethanol Companies Spar Over U.S. Biofuels Mandate

Source: By Mario Parker & Lynn Doan - Jul 15, 2013 4:58 PM CT, Bloomberg • Posted: Tuesday, July 16, 2013

The oil industry and ethanol companies are arguing about whether the U.S. should maintain consumption targets as lawmakers prepare to hold hearings on its impact on gasoline prices.

Refiners are reaching a threshold for how much ethanol can be blended into gasoline and that’s leading to costlier pump prices, according to a conference call by the oil industry-funded American Petroleum Institute today. Biofuel interests contend that higher concentrations of the additive should be sold, officials from the Renewable Fuels Association, a trade group representing ethanol companies, said on a separate call.

The value of Renewable Identification Numbers, or RINs, certificates attached to each gallon of biofuel that the U.S. uses to track compliance with a 2007 energy law rose to a record today. A U.S. House committee plans hearings this summer on the standard and the Senate Committee on Energy and Natural Resources is scheduled to hold a meeting tomorrow on gasoline and fuel prices.

“Many refiners won’t be able to get the RIN credits they need because there aren’t enough to meet the mandate,” Bob Greco, downstream group director for API in Washington said on a call with journalists.

Corn-based ethanol RINS rose 12 cents to a record $1.32 today, while advanced RINs, which cover Brazilian sugarcane-based ethanol and biodiesel, climbed 10 cents to an all-time high of $1.33, data compiled by Bloomberg show.

Pump Prices

Geoff Cooper, chief economist at the Renewable Fuels Association in Washington, said that RINs aren’t affecting gasoline pump prices and that refiners could lower the price of the credits by selling higher concentrations of ethanol.

“This is just more of the same from Big Oil,” Growth Energy Chief Executive Officer Tom Buis said in a separate statement. “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.”

Under the 2007 law, known as the Renewable Fuels Standard, the U.S. is required to use 13.8 billion gallons of ethanol this year and 14.4 billion in 2014.

U.S. gasoline consumption will average 132.9 billion gallons this year, the Energy Information Administration estimated in its July 9 Short-Term Energy Outlook.

The Environmental Protection Agency in 2011 approved blends of as much as 15 percent ethanol in gasoline from 10 percent for vehicles made after 2001. Oil-industry advocates haven’t adopted the higher concentrations, saying more testing is needed on their effect on engines.

API is also asking lawmakers to limit the ethanol consumption targets to less than 10 percent of gasoline demand, it said today.