WASHINGTON, Sept. 9, 2015 – A new study commissioned by the American Petroleum Institute says compliance with statutory blending requirements under the Renewable Fuel Standard “will result in severe economic harm.”
The study, conducted by NERA Economic Consulting, says that “forcing” statutory levels of biofuels – about 20.5 billion gallons of renewable fuels in 2015 – would require 30 percent more renewable identification numbers (RINs), a tracking system used to monitor RFS compliance. Instead of ramping up production to meet percentage requirements, the study contends that “obligated parties” will reduce production of gasoline and diesel by 30 percent to comply with required blending percentages.
“You don’t have to be an economist to know that removing almost one-third of our nation’s fuel supply would deal a crippling blow to our economy,” Bob Greco, API downstream group director, said Wednesday on a conference call with reporters.
The RFS was created in 2004 and expanded in 2007 by the Energy Independence and Security Act. According to the study, that expansion is “not feasible” in 2015 and beyond.
“The current level of gasoline demand, the blend wall limiting the share of ethanol that can be blended into the gasoline pool, and the lack of non-ethanol biofuels limit the market potential for total renewable biofuels,” the study says. “Similarly, the current market potential for higher ethanol content gasoline like E85 and E15 is too small to have an immediate impact on the amount of ethanol that the gasoline market can absorb.”
Greco also pointed to strong ethanol export figures as a reason to restate a widely-known API policy position: the organization isn’t against ethanol, just the ethanol mandate it calls “bad policy.”
“The ethanol industry is enjoying a golden era for its product in the international marketplace with exports at record highs,” Greco said. “Farmers and ethanol producers will be just fine without an ever-increasing mandate for their product (in the U.S.).”
According to the Energy Information Administration, the best year for ethanol exports was 2011, when shipments averaged almost 2.4 million barrels per month. Since then, figures have dipped. For the first six months of this year, however, exports averaged just over 1.7 million barrels per month, the highest average since 2011.
The renewable fuels industry said the study was another attempt by the oil industry to discredit ethanol and other biofuels. In a statement, Bob Dinneen, Renewable Fuels Association president and CEO, called the report “déjà vu all over again.” He pointed out similarities to a study released by API and NERA in 2012 and said the conclusions of both studies are “completely divorced from reality.”
“The 2012 study claimed the fuel market would be pushed into a death spiral by the RFS, and that the program would cause 2015 GDP to fall by a whopping $770 billion,” Dinneen said. “The 2012 study also ridiculously suggested that, in response to implementation of the RFS, diesel fuel supplies would fall by 15 percent, resulting in a 300 percent increase in diesel fuel prices and a 30 percent increase in gasoline prices. API was wrong in 2012, and it’s wrong in 2015.”
Growth Energy CEO Tom Buis also criticized the study, saying it was an effort by “API and other special interests” to “protect their stranglehold over 90 percent of our fuel market.”
“Regardless of what API claims, the bottom line is that ethanol blends help clean the environment, are higher performing, less expensive and directly benefit the consumer by providing a choice and savings,” Buis said in a statement.
The EPA is expected to release final RFS blending requirements for 2014, 2015, and 2016 by November 30. In June, the agency proposed renewable volume obligations (RVOs) that were about 4.2 billion gallons below statutory levels sought by the renewable fuels industry.
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