CNBC: Ethanol mandate, ‘blend wall’ loom large for refiners

August 12, 2013

Javier E. David, August 11 – Just when consumers got beyond the “fiscal cliff,” they may now have to contend with the “blend wall”—the latest policy catchphrase that could affect prices at the pump.

Since Congress legislated mandated renewable fuel standards in 2007, oil refiners have chafed at the requirement that all gasoline contain 10 percent ethanol. Under current guidelines, refiners must blend increasing amounts of corn ethanol—16.55 billion gallons this year—with overall gas production, currently estimated at 133 billion gallons.

Yet based on current trends of declining gasoline use, the gas-to-ethanol mix will eventually have to exceed the 90-to-10 threshold, creating the “blend wall” refiners say could hike production costs and put upward pressure on gas prices.

In June, Chevron warned ethanol mandates may even spur refiners to export gasoline in order to avert the law's punitive effects. That could in turn cut into domestic supplies and put upward pressure on prices.

Last week, the Environmental Protection Agency extended the deadline for energy companies to meet the quotas, while hinting that it may reduce next year's mandates.