Ag Policy Blog

The fight over the future of the Renewable Fuels Standard shouldn't be held on Capitol Hill.

The fight also shouldn't be dictated by a trade association representing companies with profits such as $11.6 billion in 2012 for BP or $44.9 billion for Exxon Mobil, (just shy of its 2008 record or $45.2 billion). I feel like this is a good place to insert some lyric from the Pink Floyd song, "Money."

"Money, get back. I'm alright Jack. Keep your hands off my stack."

The fate of the RFS shouldn't be in the hands of people who took about $35 million in campaign contributions from the oil and gas industry during the last election cycle, or an industry that spends more than that each year lobbying those same members of Congress.

Nonetheless, arguments over ethanol, the Renewable Fuels Standard and RIN credits are heating up in Washington while most of the region that built the ethanol industry seems largely left out of the fight.

Petroleum and refinery executives testified to senators on Tuesday about the challenges that have hit the refinery industry. Crude prices remain high but demand refined gasoline is down about 10% compared to pre-recession levels.

That 10% figure is notable because that's just about how much market the ethanol industry has taken from the petroleum industry. The petroleum industry fought against the 2005 and 2007 Renewable Fuel Standards but it was modeled out that the growth U.S. oil demand would continue to outpace ethanol production. The recession hit, but the biofuels industry expanded. At the same time, automobiles also became more efficient.

So because biofuels have hit 10% share of the market, the petroleum industry is screaming bloody murder and rejected EPA's approval of the 15% blend, E15. Jack Gerard, president of the American Petroleum Institute, spoke to FOX Business News on the topic.

"Now we are at a point where the law requires us to blend more than 10% and the auto manufacturers are saying, 'Wait, wait, wait a minute. If you use more than 10%, we're not going to warranty our cars.' "

The Hill reported on a Capitol Hill event Thursday in which the Obama administration continued to support the Renewable Fuels Standard, or as the Hill put it, the administration "doubled down on its support." Heather Zichal, a White House advisor, said in the Hill article that "Calls to repeal the renewable fuel standard are nothing but short-sighted.” The RFS remains the backbone of the administration's work to reduce oil imports and help lower emissions.

Besides the Senate hearing, the House Energy and Commerce Committee has continued to examine the Renewable Fuels Standard and now has set another hearing for next week.

Questions do remain about why oil prices are so high when supply of oil is up and demand is down. There are all of these arguments about why. One rationale is we live in a global market. Of course it didn't help earlier this year when several refineries all happened to shut down around the same time. Our oil the U.S. produces apparently is better being exported and refined overseas.

The petroleum industry blames today's high prices on a spike in the cost of RINs as refiners search for cellulosic and advanced biofuels.

Geoff Cooper, vice president of research and analysis for the Renewable Fuels Association, argues ethanol is helping keep prices from being even higher. After all, U.S. ethanol provides more than 13 billion gallons of fuel as well and is now cheaper than oil on the wholesale level. Cooper cites in EthanolProducer.com that over the past week ethanol was 67 cents per gallon cheaper than wholesale gasoline, and has consistently been cheaper over the past five years.

In that same article, Cooper also rejected the RIN argument. He said the 10% blend wall comes from the refiners refusing to go to E15. He argues it would only take a slight increase in 15% blends to satisfy the requirements.

To make its case to repeal the RFS, API now has a new advertising campaign, "FillUpOnFacts.com" to highlight how everyone's automobiles would break down and all that fuel efficiency would collapse if the oil industry doesn't save us all from higher ethanol blends. But it's merely an education campaign to explain how unworkable the current Renewable Fuels Standard is for an industry with expectations of profits in the 11-digit range. A mechanic declares, "It's bad news for drivers, because higher ethanol means lower gas mileage and AAA says too much ethanol causes engine damage, which isn't covered under warranty, and that's good news for me," the man in the ad said.

AAA has come out with a statement saying the API ad distorts the group's position. AAA supports further development of biofuels.

As we repeatedly hear about the trials and tribulations of corporate executives whose oil refinery companies make billions in annual profits, it would be nice to hear from someone in Nebraska, Iowa, South Dakota or Minnesota about what has driven their economy over the past five years.

Perhaps API could get behind the ad campaign of another API member company, Chevron ($26.2 billion in net income in 2012). Chevron has this ad campaign "The World Needs More Than Oil," and "It's Time Oil Companies Get Behind the Development of Renewable Energy."

The Hill: http://dld.bz/…

www.Filluponfacts.com

Ethanolproducer.com http://dld.bz/…

I can be found on Twitter @ChrisClaytonDTN

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