At about the same time Heidi Cullen and her know nothing AGW alarmists were being humiliated on Capitol Hill the other day, millions of Americans were busy filling up their gas tanks in preparation for summer vacations. What those Americans probably did not know was that up to 15-cents-per-gallon of their fuel costs was due to an insidious law mandating renewable fuel usage.
Under the 2007 Energy Security and Independence Act (EISA) certain levels of renewable fuels are mandated for blending with the gasoline pool. Unfortunately, while the renewable fuel levels are set to increase every year, the gasoline pool has been decreasing (demand has been declining since 2007) since the law’s implementation, leading to the so-called blendwall issue.
Because the renewable fuels set for blending are beginning to exceed the 10% of the gasoline pool, few other renewables options are available and car manufacturers will not assure engine safety for fuels with greater than 10% ethanol, refiners must bridge the gap with the purchase of credits, or in industry parlance, RINs (renewable identification numbers that are attached to each quantity of renewable fuels). The cost of these RINs has escalated dramatically over the past several months from pennies on the dollar to $1.43 per gallon just recently. At 10% of the gasoline pool, this implies a $.15 per gallon hit to consumers.
Now never mind the fact that the process of making corn-based ethanol and its usage generate more greenhouse gases than the refining and use of gasoline. The current so-called blendwall issue threatens to become an even more ominous problem in 2014 with EISA calling for an even higher renewable fuels level (the level of renewable fuels increases every year from 2007 to 2022). Refining companies such as Valero have already called next year’s mandate unfeasible and industry studies such as the recent one by the National Energy Research Association (NERA) have likewise called for an intervention.
Nonetheless, the EPA and the White House continue to ignore the issue as they continue on their quixotic quest for dealing with climate change. In the meantime, American consumers are likely to continue to pay what amounts to a surcharge at the pump. Such a regressive tax could not come at a worse time as the U.S. economy continues to struggle under the burden of Obamanomics.
Should the cost of compliance with the 2007 law continue to generate escalating RINs prices, look for this issue to garner increased attention as we head into 2014.