Charles Drevna, April 25- The adverse impacts of the Renewable Fuel Standard on consumers, a range of industries and the environment are becoming increasingly apparent to lawmakers and Americans across the nation. In response, the corn ethanol lobby is shouting propaganda in an attempt to divert attention from its faulty information and brittle arguments — most recently evident in an April 17 (“Setting the Record Straight on U.S. Gas Prices”) POLITICO op-ed.
But it is time for Big Ethanol to have a reality check.
Renewable Identification Numbers — credits managed by the EPA to determine compliance with ethanol blending requirements — are not free, as ethanol lobbyists inanely claim. If RINs are free, why did market analysts put out the warning on March 13 that RIN prices have skyrocketed from less than a penny a gallon for ethanol in late 2012 to more than $1 a gallon, significantly increasing the cost of RFS compliance for U.S. refiners in 2013?
Keep in mind that ethanol producers have no obligation to supply their product under the RFS mandates; their limited responsibility in this process entails attaching a RIN to each gallon of biofuel they produce. Refiners and importers, on the other hand, are obligated to demonstrate to the EPA that they’ve blended the RFS-mandated volumes of ethanol into gasoline, or obtained sufficient RINs if they’ve reached the point at which their fuel cannot hold any more ethanol (due to lack of consumer demand and the constraints of infrastructure). When refiners and importers have reached this ethanol maxing-out point, or “blend wall,” they have to buy those RINs on the open market — but they’re not the only entities buying and selling.
Marketers who buy the base gasoline from refiners and importers and combine it with ethanol receive those ethanol RINs. These marketers have no obligation under the RFS and are free to sell the RINs on the open market or directly to obligated parties.
In addition to the “free RINs” sham, the ethanol lobby touts that corn ethanol is lowering gasoline prices, but they fail to account for the fuel’s lower energy content. Perhaps they’re simply not aware that ethanol contains 33 percent less energy per gallon than gasoline contains. Vehicles fueled with ethanol cover fewer miles per gallon than those running on conventional gasoline, meaning that if more ethanol makes its way into gasoline, consumers will be filling up their vehicles more often. Furthermore, when adjusted for this energy difference, AAA’s fuel gauge report shows E85 is more expensive than gasoline. On Friday, April 19, for example, nationally energy adjusted E85 at $4.13 per gallon was running 62 cents per gallon higher than regular gasoline, which averaged $3.51 per gallon.