RedState: Great Achievements in Central Planning: The Renewable Fuel Standard

July 22, 2013

Steve Maley, July 20- In 2005, Congress, in its infinite wisdom, imposed the Renewable Fuel Standard on America.  The RFS mandates yearly increases in the amount of ethanol that must be used in motor fuel, on an ever-increasing schedule, through 2022.

Problem is, nobody anticipated a crummy economy, high gasoline prices and shrinking consumption of motor fuel. But the RFS marches on.* As depicted in the video above (from our friends** at smarterfuelfuture.org), the numbers are starting to look wacky and detached from reality.

“The renewable fuel standard obligates refiners to add steadily increasing amounts of ethanol and other alternatives into the nation’s transportation fuel supply — up to 36 billion gallons in 2022. But oil industry leaders say they are hitting a 'blend wall' where they can no longer mix in enough ethanol to meet the renewable fuel mandate’s volumetric targets without exceeding a 10 percent threshold acceptable for use in all cars and trucks.”

The big oil refiners and marketers — BP, Shell, ExxonMobil — are split in their support of the RFS. Each company’s stance reflects its ability to compete in the RFS world. Shell is happy with the RFS, while BP would modify it and XOM would scrap it all together. It all depends on whose ox is being gored.

But San Antonio-based Valero Energy Corp., a pure refiner, finds itself in a squeeze because of the intricacies of the law:

“…  while it is the nation’s third-largest ethanol producer, the renewable fuel law blocks [Valero] from holding on to the biofuel credits that are created with each gallon of the product. Instead those tradable biofuel credits, known as RINs, travel with each gallon of ethanol to blenders. Because Valero isn’t blending the majority [of] its own product, it can’t take advantage of those credits, even though the renewable fuel law puts the onus on refiners to comply by securing RINs. As a result, Valero is forced to buy the credits in a market where RIN prices have climbed to over $1 per gallon, up from $0.05 a year ago.”

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