As American Gasoline Prices Soar, Some Blame Ethanol
by Christopher M. Matthews (Wall Street Journal) Prices for the biofuel have surged, rekindling a debate about whether it’s contributing to pain at the pump — … Now, lobbyists for the refining industry are seizing on the recent ethanol-price jumps and urging the Biden administration to lower the amount of the biofuel they are required to blend with their products, arguing it will tamp down gasoline prices. Supporters of the biofuel industry argue the opposite is true, and are warning the administration against relaxing the requirements.
Most analysts agree that the primary causes of rising fuel prices are increased energy demand, spurred by an uptick in global economic activity, and oil production that hasn’t kept pace. But the cost of complying with the RFS and other regulations is currently adding nearly 20 cents to the price of a gallon of gasoline in some parts of the country, according to some analysts.
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Fuel demand and traders piling into commodities as a hedge against inflation have pushed ethanol prices to record levels. Daily production of ethanol in the U.S. hit a record level of 1.11 million barrels a day in October, according to the U.S. Energy Information Administration, but has been unable to keep up with fuel demand as many drivers return to the road. Agricultural prices more broadly have risen on the back of a snarled supply chain and higher input costs for crops.
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Geoff Cooper, president of the Renewable Fuels Association, which represents ethanol producers, said it is absurd to argue ethanol is adding to higher fuel costs based on irregular market conditions. As recently as September, ethanol and unblended gasoline were trading around the same prices, according to FactSet data. Research has shown that the biofuel generally doesn’t increase gasoline prices, he said.
“Refiners are always looking for an opportunity to scapegoat the program,” Mr. Cooper said.
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A group of small refiners has recently argued to the White House that they will go bankrupt if the Biden administration doesn’t roll back blending requirements, further exacerbating soaring gasoline prices, said people familiar with the matter. Some of the companies have slowed their purchases of blending compliance credits, amassing billions of dollars in regulatory obligations that will come due in March when credits must be turned into the EPA for the previous year.
“They’re really rolling the dice by ignoring their compliance obligations under the RFS, thinking they will get bailed out by the administration,” said Mr. Cooper. READ MORE
EPA REGION 7 LEADER SAYS REGAN COMMITTED TO THE LAW ON RFS (Brownfield Ag News; includes AUDIO)
Why ethanol’s recent surge looks temporary (Crain’s Chicago Business)
Explainer: U.S. gasoline prices could fall below $3 if oil market sustains losses (Reuters)
We All Pay Extra for Ethanol: A fair comparison must be based on heating value (Wall Street Journal)
