Federally mandated ethanol credits are getting pricier. Consumers, this means you.

posted at 1:21 pm on March 20, 2013 by Erika Johnsen

It is perfectly true that there are a bunch of factors that together determine the prices we pay at the pump — oil is supplied, bought, and sold in a very global market, after all — and that the federal government doesn’t always have the ability to impact those factors. That said, there are also plenty of ways in which the government can and does influence gasoline prices — and if and when prices spike this summer, you can reasonably lay a very heady chunk of the blame on the Obama administration.

The EPA, you see, simply insists that we must all continue to mix still more gasoline with even higher ethanol blends — and they are really not all that concerned with what that requirement does to prices at the pump.

U.S. drivers may face a $13 billion increase in the cost of gasoline this year as the price of federally mandated ethanol credits has risen 10-fold for oil refiners including Valero Energy Corp. (VLO) and CVR Energy Inc. (CVI)

Fuel processors such as Valero, the world’s largest independent refiner, and Exxon Mobil Corp. (XOM) are pushing the U.S. Environmental Protection Agency to reduce the amount of ethanol they’re required to add to gasoline to avoid what they say will be a sharp spike in prices at the pump just as the summer driving season begins.

Refiners buy biofuel credits, known as RINs, which are available as an alternative to actually blending ethanol into gasoline. The cost of those credits has ballooned from 7 cents at the start of the year to more than $1 as the 2013 federal mandate for biofuel exceeds 10 percent of gasoline sales, the maximum that refiners say the market can absorb. …

Consumers are at risk of paying 10 cents a gallon more for gasoline this year if the ethanol credits continue to sell at a price of more than $1, Roger Read, a Houston-based analyst for Wells Fargo & Co. (WFC), said in a March 11 note to investors.

In a nutshell: If you don’t want to comply with the EPA’s standards, you have to buy credits to excuse yourself; nobody really wants to comply with the EPA’s standards, so the price of the credits is going up.

Critics claim that the spike in credit prices is just the result of some panic-trading, and the average price will eventually settle down somewhere closer to 31 cents — which completely misses the point. Why the heck does the Environmental Protection Agency even have a Renewable Fuel Standard that forces people to buy a product they don’t want to use, at an increased price? Nobody even likes ethanol, except, of course, for Big Ethanol lobbyists and the crony-bureaucrats who love them.

How often are we going to be forced to put up with the EPA’s utter folly and special-interest pandering masquerading as an honest renewable energy venture?


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