The Oil Industry's Fight to Kill Renewable Fuels—and Why It May Win

by Elizabeth Douglass (InsideClimate News) The American oil industry could be on the verge of winning its war on the federal Renewable Fuel Standard (RFS), as the Obama administration weighs changes that could severely undermine the nation's most successful—and most divisive—effort to cut crude oil consumption in the nation's cars.
Faced with what it called an "inadequate domestic supply of renewable fuels," federal regulators in November proposed lowering the 2014 usage requirements for the total volume of renewable fuel and for advanced biofuels. Last month, regulators said they may also grant oil industry requests for waivers on their biofuel obligations for 2014 as well as for fiscal 2013, which ends in June.
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But, for all its struggles and faults, the RFS accomplished things that almost no other gasoline additive or alternative was in a position to achieve so quickly.
For example, the growing use of ethanol and other biofuels has reduced tailpipe emissions that cause air pollution and that are linked to health problems ranging from asthma to cancer. And now that more efficient ethanol plants are in place and U.S. refiners are making more fuel from Canada's dirtier tar sands oil, it's clear that biofuels also generate less greenhouse gas emissions than gasoline—even in the case of corn ethanol.
What's more, biofuels have supplanted billions of gallons of petroleum in gasoline and diesel, a trend that is cutting overall oil demand and steadily eroding the oil industry's de facto monopoly on transportation fuels.
That has made reining in—or preferably, repealing—the renewable fuel requirements a top priority for oil companies in the last year.
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But free-market purists face a dilemma when it comes to the U.S. fuel supply: Almost all car owners are locked into gasoline and couldn't switch to a competing fuel if they wanted to.
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The most publicized renewable energy sources, wind and solar, are of little use on the oil front. They are producing power for the nation's electricity market, which is still dominated by nuclear power, coal and natural gas. Petroleum provides just one percent of the nation’s electricity, according to the U.S. Energy Information Administration.
When it comes to reducing oil consumption, there's no better target than transportation. Cars, motorcycles, buses, trucks, ships and planes gulp down more than 70 percent of the petroleum used in this country.
Rising fuel efficiency standards have already played an important role in reducing demand for gasoline, and they will cut demand further as higher mileage requirements kick in. Increasing sales of hybrid vehicles and those powered exclusively by natural gas, electricity, propane and hydrogen are chipping away at the gasoline fleet.
But those measures require new cars, so their success is limited by how many—and how quickly—specialty vehicles get purchased in lieu of gasoline-fueled versions. All those alternative vehicles combined are expected to wrest away just 11 percent of the gasoline vehicle market over the next decade, according to a study conducted for the Fuels Institute.
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It didn't help that many oil companies have provisions in their franchise agreements that either forbid or strongly discourage gas station owners from offering E85.
Oil refiners are reluctant to pave the way for blending more biofuel into gasoline and diesel, because that cuts into demand for the petroleum content in each gallon of fuel, said Kloza, the oil analyst. So they're thinking, "If we embrace E15 or E20 or E30 or E85, what are we going to do with the hydrocarbons that we produce at these billion-dollar asset refineries?" READ MORE