This morning, I was reading an interesting article by Ned Ryun at Real Clear Politics about one casualty of the coronavirus pandemic that doesn’t draw much press coverage. The energy industry, especially the oil and gas sector, has been hit particularly hard recently by a combination of factors. Of course, the disease is a major concern because neither drilling for nor refining oil are jobs one can do from home. The same goes for natural gas.
At the same time, oil prices have completely cratered as demand has slumped and Russia engages in a price war with Saudi Arabia over production volumes. (They reached a tentative deal on production today, but most industry experts predict that the proposed levels won’t do enough.) With that in mind, there is definitely something the government could do to help. As Ryun points out, some of the pressure on this massive industry and all the jobs it produces could be eased by finally doing away with the Renewable Fuel Standard.
To add to this problematic situation, small and large U.S. refineries are getting punished under an unrealistic Renewable Fuel Standard mandate. So in the middle of an economic downturn, as our energy sector is under tremendous stress, we are continuing the madness of unnecessary regulations on a key aspect of our economy (one that should also be considered a national security issue). These RFS mandates imposed on this core industry in America impose a heavy cost of RFS compliance credits (RINs) that is then draining cash from American-owned businesses at a time when draining cash can, and actually may, lead to bankruptcy.
How did we even get to this point? The RFS goes back to the 1970s when Americans were worried about running out of gasoline. Mario Loyola wrote in The Atlantic on Nov. 23, 2019, “With experts warning that the world was quickly running out of oil, the shocks of ’73 and ’79 led President Jimmy Carter to call for wartime-style rationing of fuel and other draconian measures to avoid a ‘national catastrophe.’”