The blame game: renewables experts, oil refiners trade barbs on impact of rising renewable fuel mandates

In Washington, the American Fuel & Petrochemical Manufacturers is disputing the numbers from RFA’s recently released analysis, which shows how Big Oil stands to gain a $9.2-15.2 billion windfall from a possible reduction to EPA’s 2014 RVOs.

Bob Dinneen, RFA President and CEO, commented:

“AFPM are misunderstanding the very basic principles of supply and demand. If you reduce the gasoline supply by taking ethanol volume away, prices for gasoline will rise across the board. It’s that simple. And eventually, the lost ethanol volume would be replaced by gasoline refined from tar sands, tight oil from fracking, or Venezuelan heavy crude, all of which are far more costly to the wallet and the environment than ethanol. Who stands to gain from higher gasoline prices and more gasoline volume? Oil refiners, of course. That’s what this is really all about—Big Oil wants to shut out competition and put more money in its already-stuffed pockets.”

As AFPM and RFA traded shots over the impact of changing next year’s Renewable Fuel Standard blender obligations, Iowa State University economists Bruce Babcock and Sebastien Pouliot are pointing out that oil refining industries doomsday scenarios are flawed. “There are viable options versus restricting supply and driving up prices,” CARD economists Babcock and Pouliot write. “A more likely scenario is for companies affected by the RFS to evaluate available options and pursue an option that offers the greatest financial return over the longest term, even when an upfront investment is required.”

At the same time, new data emerged on exactly who is the big winner in this year’s soaring ethanol RIN market. Traders say that the world’s largest oil-trading firm, Vitol “was a big buyer of RINs early in the year before prices spiked. Several also said its Houston-based trading team was a prominent seller as prices climbed,” according to a report in Reuters.