A multi-year suspension of the Renewable Fuel Standard (RFS) could reduce U.S. ethanol use by more than half, the Renewable Fuels Association said. It criticized a report by the Energy Policy Research Foundation, Inc., that calls for suspension of the standard.
To compensate for a decrease in ethanol availability that would result if the standard were suspended, the Research Foundation paper suggests a variety of “economically impractical and politically infeasible options,” the Renewable Fuels Association (RFA) said in a statement. The options cited in the paper range from ramping up gasoline imports to reducing diesel fuel and heating oil production in an attempt to extract more gasoline from crude oil, the association said.
The Energy Policy Research Foundation, Inc. (EPRINC) is a not-for-profit organization that studies energy economics with special emphasis on oil. It is supported by petroleum and energy companies. On its website the Foundation states, “Views expressed in publications, interviews and testimony result from the Foundation’s own analysis and are not meant in any way to represent a consensus of its members’ views.”
The RFA argued that in attempting to “tear down” the RFS, the report “underscores the importance of the program and highlights the lack of sensible or economic options available to refiners if ethanol use is severely curtailed.”
Here is more based on the RFA’s statement, dated Sept. 18 and posted on its website:
“If you do away with the RFS over the long term and less ethanol is available, as EPRINC is suggesting, you leave a gaping hole in the gasoline supply,” said RFA President Bob Dinneen. “The options available to fill that hole just don’t make economic sense and would further increase fuel prices for consumers. Ironically, the EPRINC report actually underscores why the RFS is so important; it highlights the fact that cutting ethanol out of our gasoline supply would result in increased dependence on imported oil and refined products, or would force refiners to make a choice between maximizing gasoline or diesel production. Consumers lose in either case. Clearly, the best option is not to tinker with the RFS and let it continue to work as intended.”
Dinneen pointed out other major flaws in the new EPRINC report, such as internal inconsistencies regarding the report’s characterization of the flexibility of the RFS. On one hand, the report states that the RFS has “created inelastic demand for ethanol,” but then on the other hand, it acknowledges that ethanol production has plummeted by about 15% since the beginning of the year “…as high corn prices have caused many ethanol producers to idle production.”
“They call the RFS ‘inelastic’ but then point out that the ethanol industry has adjusted quickly to higher corn prices by reducing production,” Dinneen commented. “EPRINC clearly misunderstands the flexibility that is inherent to the RFS program that is allowing the ethanol industry to respond rationally to market signals.” Dinneen noted that recent projections, including one by the U.S. Department of Agriculture, show the ethanol industry reducing its corn consumption more than the livestock feeding industry in 2012-2013.