The People of America's Oil and Natural Gas Indusry

Good Fuels Story, Not-So-Good RFS Reality

Mark Green

Mark Green
Posted May 27, 2016

When you head out for your Memorial Day drive, consider the current price of gasoline – the U.S. average retail price of $2.30 a gallon, which the U.S. Energy Information Administration (EIA) says is 47 cents lower than at the same time last year and the lowest average price just before a Memorial Day weekend since 2009. EIA’s chart showing gasoline prices across the country, by county:

county

Now, let’s all thank the U.S. energy revolution, which is playing a big role in consumer benefits, like those seen at the pump. EIA notes that lower gasoline prices reflect lower crude oil prices. And the global crude market wouldn’t be where it is without higher U.S. crude production. API Chief Economist Erica Bowman:

“Thanks to industry innovation and technological advancements, which have been the driving force behind America’s energy revolution, AAA estimates that more than 38 million Americans will take advantage of low gas prices and the long holiday weekend to travel. The benefits for U.S. consumers – as well as manufacturers, the travel and tourism industry and frankly our entire economy – are hard to overstate. U.S. production is an important factor in lower global crude markets, which has translated into lower energy costs for individual Americans and families.”

This is all great news for consumers. Now some not-so-great news. The federal Renewable Fuel Standard (RFS) continues to subject motorists and the broader economy to potential negative impacts by requiring increasing volumes of ethanol in the fuel supply.

EPA’s proposed 2017 biofuel volumes could mean higher ethanol blends like E15 get pushed into the marketplace. Studies have shown that E15 can damage engines and fuel systems in millions of vehicles on the road today. Repair costs could be borne by consumers, who aren’t protected enough in EPA’s proposal.

Meanwhile, a Congressional Budget Office study found that breaching the ethanol “blend wall,” the point where required ethanol in the fuel supply exceeds the safe level of 10 percent, could boost the price of gasoline by up to 26 cents per gallon. Think of the larger economic impacts. Frank Macchiarola, API downstream group director, talked about the RFS this week with a group of energy bloggers:

“EPA's proposal pushes consumers to use high ethanol blends they don’t want and that most cars on the road today were not designed to use. The proposal makes abundantly clear that the only solution is for Congress to repeal or significantly reform the RFS.”

Macchiarola said about 90 percent of vehicles now in use weren’t designed for E15, and manufacturers warn that using E15 can result in a voided new car warranty.

mfg

The RFS should be repealed or significantly reformed. API is urging EPA to set the final ethanol mandate at no more than 9.7 percent of gasoline demand to avoid breaching the 10 percent blend wall and to ensure that strong consumer demand for ethanol-free gasoline can be met. Macchiarola:

[T]this is really one of the fundamental, structural problems with the RFS: It’s speculative, because we’re basing it off demand projections for the following year. … The only certainty about the RFS is the uncertainty that it creates each time EPA comes out with its rulemaking.” 


ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.