Allegedly imaginary ethanol “blend wall” mysteriously cost refiners at least $1.3 billion in 2013

posted at 2:51 pm on April 1, 2014 by Erika Johnsen

When Congress first enacted and then expanded the inglorious ethanol subsidy that is the Renewable Fuel Standard back in 2007, lawmakers devised the rule — requiring that refiners blend certain volumes of biofuels into the country’s fuel supply or else buy credits for an exemption — based on the crucial assumption that the nation’s demand for gasoline would continue to increase* indefinitely as our economy grew. Therefore, they reasoned, the fuel supply would be able to absorb an annually increasing amount of ethanol — but because of increased fuel efficiency and slackened economic growth, that hasn’t been the case at all. For awhile now, refiners have been expressing concern over being forced to run the country’s gasoline up against the “blend wall,” i.e., the point at which the ethanol-gasoline blends are no longer safe for use in most cars and trucks.

Pish tosh!, cried the ethanol lobby, which (as you might imagine) is rather partial to the Standard and the many ways in which it has artificially jacked up the country’s demand for corn and other biofuel resources. When the Environmental Protection Agency announced late last year that it intended to revise the required volumes of biofuels in a downward direction, ethanol producers across the country immediately went into a tailspin of furious denunciations against the oh-so-rent-seeking oil industry’s supposedly illegitimate complaints about ethanol-to-oil ratios, or whatever made-up nonsense about which those greedy oil execs were raving. Even if that were as big a problem as the oil industry was making it out to be, Big Ethanol insisted about Big Oil’s motives, Big Oil is super-duper rich, and can totally handle the extra pressure without passing costs onto consumers.

Or something.

Last year’s spike in the price of ethanol blending credits cost independent refiners at least $1.35 billion, more than three times as much as the year before, according to a Reuters’ review of securities filings.

The tally, which has not been previously reported, is a conservative estimate as it includes only nine refiners that disclosed the figures. Others affected did not specify the cost of buying Renewable Identification Number (RINs), paper credits used to meet quotas for blending biofuel into gasoline and diesel. …

The review also highlights how the impact was unevenly distributed, with independent refiners CVR Refining and LyondellBasell alone shouldering more than a fifth of the cost although they only account for 2.5 percent of the nation’s daily refining capacity. …

Valero Energy Corp, the biggest U.S. refiner with 10 percent of capacity, spent about $517 million on RINs in 2013.

“We were clear that Valero could not bear that cost alone, so much or all was passed on to consumers,” said Valero spokesman Bill Day. The company estimates that it will spend another $250 million to $350 million on RINs in 2014.

Ugh. The EPA has yet to make a final decision on the RFS’s requirements for 2014 (although, yes — they will be applied retroactively), and you can count on Big Ethanol continuing to fight the potential downshift every step of the way. The fact that the Renewable Fuel Standard’s supposed “green” credentials have long since been disproved is of little consequence to them.

*Oops: I originally wrote “decrease” where I meant “increase,” gah.


Related Posts:

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Trackback URL

Comments

…and no one is in jail!

KOOLAID2 on April 1, 2014 at 2:54 PM

Big Government, getting Bigger… and every WHOOPS factor keeps having Bigger and Bigger consequences.

When Armageddon comes, ain’t no one gonna be munching popcorn, watchin’ from the sidelines. ‘Cause there won’t be any sidelines.

Marcola on April 1, 2014 at 3:03 PM

I am growing angrier by the day.

Midas on April 1, 2014 at 3:04 PM

All the while your small gas engines are burning up more quickly and fuel lines are disintegrating as well as your cars fuel system corroding and causing premature failure.

Nothing is logical in politics/government.

brtex on April 1, 2014 at 3:07 PM

Another socialist government RIP OFF!

Thank you Obama for your great management skills!

Solyndra would be proud of you!

Obamatrix on April 1, 2014 at 3:09 PM

Therefore we must impose a new organization to make sure governmet is more logical..so sayeth Barry ..Supreme overlord of all that is fair..eat cake!

thunderhorse on April 1, 2014 at 3:14 PM

where can we get the list of people voting to keep this bad legislation alive? is it because the dems allowed the EPA to write the rules?

Every GOPer should be running against ethanol and I hear nothing from them.

DanMan on April 1, 2014 at 3:19 PM

where can we get the list of people voting to keep this bad legislation alive? is it because the dems allowed the EPA to write the rules?

Every GOPer should be running against ethanol and I hear nothing from them.

DanMan on April 1, 2014 at 3:19 PM

But that would alienate those dear Iowa folk who are oh-so-important in selecting the next GOP presidential candidate, you see…

Midas on April 1, 2014 at 3:21 PM

End ethanol mandates now!!!

Whitey Ford on April 1, 2014 at 3:29 PM

But that would alienate those dear Iowa folk who are oh-so-important in selecting the next GOP presidential candidate, you see…

Midas on April 1, 2014 at 3:21 PM

Therein lies the rub…

Kaffa on April 1, 2014 at 3:30 PM

Stop using our food as motor fuel.

rbj on April 1, 2014 at 3:34 PM

‘Big Eth’ won’t be satisfied until every Third World ethnic is dead from malnutrition, caused by the US spewing their food out’n our tailpipes. They must all be Raaaacists! Oh, wait, let’s go renewable ‘electric’ to save the planet. We all could put solar panels where the sun don’t shine and windmills where the wind don’t blow. Screw raptors and migratory birds. When Hollowwood’s ‘Noah’ has killed off all us energy-suckin’, Gaia-killin’ humanoids, all will be well. Elgore might even have to move into the bowels Mother Earth to survive another day…

vnvet on April 1, 2014 at 3:43 PM

yes — they will be applied retroactively

Because ex-post facto don’t apply to no regulations!

GWB on April 1, 2014 at 3:49 PM

Here in Iowa the octane of the ethanol blend changed from 89 to 87 recently increasing the difference between the ethanol blend and the strait gasoline to 30 cents.

I have a question for those living in areas where only the ethanol blend what octanes are available?

agmartin on April 1, 2014 at 3:59 PM

Nothing but a tax.

MikeinPRCA on April 1, 2014 at 4:05 PM

Erika, your analysis is decent, but you failed to point out the glaring reason why this is going on (and will continue to go on):

When Congress first enacted and then expanded the inglorious ethanol subsidy that is the Renewable Fuel Standard back in 2007, lawmakers devised the rule — requiring that refiners blend certain volumes of biofuels into the country’s fuel supply or else buy credits for an exemption

The intended result:

Last year’s spike in the price of ethanol blending credits cost independent refiners at least $1.35 billion, more than three times as much as the year before, according to a Reuters’ review of securities filings.

The RFS is working exactly as planned by the EPA.

Kickbacks to the corn lobby? Check.
Advancing the ‘green’ agenda (in spirit)? Check.

Which leads us to:

The fact that the Renewable Fuel Standard’s supposed “green” credentials have long since been disproved is of little consequence to them.

Gee, I wonder why it’s of no consequence? It was never the intention.

nullrouted on April 1, 2014 at 4:10 PM

Nothing but a tax.

MikeinPRCA on April 1, 2014 at 4:05 PM

Absolutely right. Every single time you hear ‘climate change’ just swap it to ‘climate tax’ and you’ll understand where they’re coming from better (rather than just raging because climate change is bs).

nullrouted on April 1, 2014 at 4:12 PM

Typo …
“based on the crucial assumption that the nation’s demand for gasoline would continue to decrease indefinitely as our economy grew.”

Should be “increase”

petra on April 1, 2014 at 4:29 PM

I work for a major oil company and in one of our largest refineries; we could be paying half of what we pay now if the EPA wasn’t involved in this. Remove state and federal taxes and gas would be under a dollar per gallon. It’s sad to say the least.
Gasoline Is a by-product of more lucrative carbon based products, if not for a combustion engine to burn it, we’d throw it away. Diesel is bottom of the barrel fuel, junk. We add so much crap to it, now it cost more than gas. Summer blends, winter blends, city blends and rural blends.
All of this to artificially inflate the price of gas to push us to wind and solar; the people it hurts the most? The middle class and the poor, who have to pay higher prices for everything from food to electricity.

Michh on April 1, 2014 at 4:30 PM

Last year’s spike in the price of ethanol blending credits cost independent refiners at least $1.35 billion, more than three times as much as the year before, according to a Reuters’ review of securities filings.

The tally, which has not been previously reported, is a conservative estimate as it includes only nine refiners that disclosed the figures. Others affected did not specify the cost of buying Renewable Identification Number (RINs), paper credits used to meet quotas for blending biofuel into gasoline and diesel.

So if an oil refiner produces gasoline or diesel fuel without the “required” amount of biofuel in it, and buys RIN’s, to whom is the money paid for the RIN’s? To the ethanol industry or the government? Is the ethanol industry being paid for fuel it didn’t produce, or is this another unnecessary “green” tax by Uncle Sam on those EEEEEEEEEVIL Big Oil companies?

Steve Z on April 1, 2014 at 4:55 PM

If you think that government problems are bad wait until you see their solutions. Progressive democrats bring nothing but misery and death just like every other collectivist regime.

jukin3 on April 1, 2014 at 4:58 PM

Is it true that Ethanol is NOT approved for Molotov Cocktails?

Another Drew on April 1, 2014 at 5:06 PM

Steve Z on April 1, 2014 at 4:55 PM

Who?
Probably part of the Carbon Credits cashed in by AlGore.

Another Drew on April 1, 2014 at 5:08 PM

But that would alienate those dear Iowa folk who are oh-so-important in selecting the next GOP presidential candidate, you see…

Midas on April 1, 2014 at 3:21 PM

I believe for 2016 Texas primaries are #5. Hello, may I introduce my friend Ted?

DanMan on April 1, 2014 at 5:11 PM

If you think that government problems are bad wait until you see their solutions. Progressive democrats bring nothing but misery and death just like every other collectivist regime.

jukin3 on April 1, 2014 at 4:58 PM

Fitting for the Rufus T. Firefly president: “If you think this country’s bad off now, just wait till I get through with it!”

There Goes the Neighborhood on April 1, 2014 at 5:59 PM

Fitting for the Rufus T. Firefly president: “If you think this country’s bad off now, just wait till I get through with it!”

There Goes the Neighborhood on April 1, 2014 at 5:59 PM

Did Barry say that? I really don’t know, if he did I missed it. He’s definitely stupid enough to say that.

slickwillie2001 on April 1, 2014 at 8:50 PM

I remember a few months ago some Democrat senator or congressperson asking for an investigation of why fuel prices had spiked.

I never heard any follow up.

Now I know why.

The answer didn’t fit the official narrative.

s1im on April 1, 2014 at 9:28 PM

If we just hanged all the Democrats, we could solve these problems quickly.

Adjoran on April 1, 2014 at 9:36 PM