Big Oil Companies Reap Windfall From Ethanol Rules
by Bradley Olson (Wall Street Journal) Some refiners stand to rake in $1 billion by selling fuel credits, while others must spend millions to comply — Environmental regulations designed to boost the amount of ethanol blended into the U.S. gasoline supply have inadvertently become a multibillion-dollar windfall for some of the world’s biggest oil companies.
Companies including Chevron Corp., Royal Dutch Shell PLC, and BPPLC could reap a total of more than $1 billion this year by selling the renewable fuel credits associated with the ethanol program, according to an analysis commissioned by CVR Energy, a refinery operator controlled by billionaire Carl Icahn, a vocal critic of the rules.
For other companies, especially smaller refiners, the rules have had the opposite effect, forcing them to spend hundreds of millions to buy credits to comply.
“Because a few other companies made different business decisions and are now living with the consequences is not a reason to suddenly change the rules,” said Geoff Morrell, a senior vice president for BP.
Another area of dispute is the step in the fuel supply chain at which the credits are created. It takes place at the point where ethanol and gasoline are blended. That favors companies that control vast networks of gasoline stations and thus reap more credits than the amount of oil they actually refine into fuel, while disadvantaging smaller refiners without as much of a retail presence.
Valero, which spun off its retail stations in 2013, CVR and other refiners have suggested changing who is obligated to account for blending, making it retailers and wholesalers instead of refiners. READ MORE