Obstructionist Big Oil Hurts Consumers

t rudnicki

By Tim Rudnicki, Esq.

Why should you care about what’s behind all the hype over “renewable identification numbers” (RINs)?  If you buy gasoline for your vehicle, you probably know ethanol displaces dirty and expensive petroleum and serves as an octane booster for the gasoline.  While it’s not immediately visible, here in the Midwest, the biofuel ethanol has helped to suppress the price of gasoline by approximately $1.69 per gallon.  So where do the RINs come into the picture and why do they matter?

Under the Renewable Fuel Standard (RFS), a federal law, an oil refiner is obligated to demonstrate to the U.S. Environmental Protection Agency each year that the oil refiner has used a certain volume of biofuel like ethanol.  A renewable fuel identification number is associated with each gallon of biofuel that is produced and the number goes to an oil refiner when the oil refiner buys the biofuel.  With ownership of the biofuel the oil refiner may do three things with the RINs:  KEEP  to demonstrate compliance, BANK for the following year or SELL on the market.

With these three options, refiners have great flexibility in the marketplace.  If an oil refiner is below their renewable volume obligation, the refiner can simply draw from its banked RINs.  In this situation, the oil refiner uses its banked RINs to complete its volume obligation rather than actually putting more biofuel into the gasoline market.  On the other hand, if the oil refiner failed to use enough biofuel or to bank any RINs, the refiner will need to buy the RINs in the marketplace.

So what happens when oil refiners keep buying their compliance with the law rather than actually providing consumers with more biofuels at the pump?  You end up with the current contrived crisis.  The feigned crisis is based on claims about scarce RINs, not scarce biofuels, and how scarce RINs might impact the price of gasoline.

Given the long history of the renewable fuel laws, how could this happen?  To find out, here is a starter list of questions we should put to big oil:

1. Would you agree this is March 2013?  When did you first learn about the Energy Policy Act of 2005?  About eight years ago, this law required a growing amount of biofuels be blended with gasoline.

2. Who is responsible in your oil company for complying with the Energy Independence and Security Act of 2007?  This Act was signed into law on December 19, 2007, a little over five years ago, is referred to as RFS2 and calls for greater use of biofuels.

3. Tell us what actions your oil company has taken to make E15 available to consumers?  Just a reminder, in June 2012 the U.S. Environmental Protection Agency approved the use of E15 in 2001 and newer cars and light duty vehicles on the nation’s highways (approximately 70% of the vehicles).

4. Do you have a problem giving consumers more biofuel choices at the pump?  The last time I purchased E15, a premium fuel, it cost about $0.10 less per gallon compared to regular gasoline.

This is not the time to change any renewable fuel law.  The laws are working.  The part that is not working is big oil.  Big oil controls 90% of the gasoline market and they appear to be working to get more.  Rather than capitulate to big oil, we need bold leadership at the state and federal level of government to hold the oil companies accountable for complying with the law - the law that requires oil companies to give consumers more biofuel choice at the pump!

Take a look at the balance of Minnesota Bio-Fuels Buzz for a sampling of some important issues in the world of biofuels.  As always, if you have questions or comments about what you read in the Buzz, send me a note (This email address is being protected from spambots. You need JavaScript enabled to view it.) or call me (612.924.6495).