EPA looks at suspending ethanol blending requirement

I’m not sure how much this will matter now that we’re basically out of places to store all of the oil that we’re pumping, but it’s still worth looking this proposal over.

Last week we discussed the possible opportunity available to us if the EPA would agree to at least suspend the mandates of the Renewable Fuel Standard until the worst of the pandemic is behind us. Getting rid of it entirely would be preferable, but that would require congressional action that the Democrats would never agree to and it’s unclear if the President could be convinced to support the idea even if they did.

The good news (possibly) is that I wasn’t the only person suggesting the idea and the EPA seems to at least be willing to consider it. This could go a long way toward saving a lot of oil and gas industry jobs that are otherwise threatened if the refineries start shutting down to avoid bankruptcy. (The Hill)

The Environmental Protection Agency (EPA) is weighing whether to let oil refineries skip on adding ethanol to their fuels, a move being requested by governors in oil-rich states who say the industry can’t afford the expense of blending in biofuels as oil prices plummet.

Oil prices hit a new low Friday amid a number of administration efforts to ease financial pressure on the industry. Ethanol producers, however, say they have likewise been affected as the economy tanks due to the coronavirus.

In a letter to the EPA sent earlier this week, five governors from oil-producing states said their refineries should be off the hook from meeting legal requirements to add ethanol to their products, arguing the oil industry is in too dire of financial straits to do so.

All the EPA has said thus far is that they are “monitoring the situation closely and reviewing the governors’ letter.” But at least they acknowledged receiving it and, presumably, are presenting the idea to President Trump.

As Ed Morrissey noted in the article I linked above, the oil and gas industry is on shaky ground at the moment. Fewer people are driving so the demand for gas has plummeted. At the same time, the United States remains one of the leading oil producers in the world. On top of that, the battle between Russia and Saudi Arabia over cutting production was already depressing global oil prices.

So now we don’t have anywhere to store all the oil we’ve been producing so some of the rigs and drilling sites will have to be idled, putting even more people out of work. The severely reduced demand for gasoline will depress prices further and the refineries won’t be able to sell as much finished product even if they have the capacity to keep producing it. With that in mind, forcing them to continue purchasing vast amounts of ethanol (that they never wanted to begin with) or buy expensive RIN credits to comply with RFS requirements will only push more of the smaller refineries close to bankruptcy. At this rate, the number of additional jobs lost in this sector could be in the hundreds of thousands on top of all the other people that are already out of work.

I’m not entirely unsympathetic to the plight of the ethanol industry. There are legitimate markets for ethanol, many of them in other countries, aside from blending it into our gasoline supply. They need to make a living too, but demand for ethanol has plummeted just as it has for oil and gas. Until this pandemic ends (assuming it does), everyone is going to be struggling to get by. But the federal government should be doing what it can to alleviate problems, not add to them. And currently, the RFS is making an already bad situation even worse.

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