Pro Farmer Extra
- From the Editors of Pro Farmer newsletter -
March 22, 2013
Pro Farmer Associate Editor Meghan Pedersen and Washington consultant Jim Wiesemeyer offer up their perspectives on the challenges facing the ethanol industry.
RIN volatility raises concerns about gas prices
Recent volatility for ethanol Renewable Identification Numbers (RINs) has spurred lawmaker and industry reaction. Earlier this month the credits traded above $1 per gallon as tightening ethanol supplies and mandates to blend renewable fuels resulted in high demand for these blending credits.
Last week Senator David Vitter (R-La.), the top Republican on the Environment and Public Works Committee, and Sen. Lisa Murkowski (R-Alaska), ranking member of the Energy and Natural Resources Committee, asked Gina McCarthy, nominee to lead the Environmental Protection Agency (EPA), to outline “how she will protect American citizens from rising gas prices due to the rising cost of ethanol RINs.”
The Wall Street Journal Online reports, “Valero Energy Corp. said it will have to spend two or even three times as much as it did last year to comply with the federal ethanol-blending requirement due to the high prices of credits it needs to buy under the law.” House panel examines RFS Launching a bipartisan review of the Renewable Fuels Standard (RFS), the House Energy and Commerce Committee released its first in a series of white papers that will examine a number of issues emerging with the current system and solicit input from interested stakeholders.
Noting that it has been more than five years since the RFS was revised and that in some ways RFS has not unfolded as expected, the white paper notes“Several implementation challenges have emerged that received little if any consideration prior to passage of the Energy Independence and Security Act of 2007.
Furthermore, the overall energy landscape has changed since 2007. It is time to undertake an assessment of the RFS.” The first white paper addresses the so-called “blend wall,” or the point at which adding the required volume of ethanol to gasoline supplies would result in ethanol blends that exceed 10%, which is the maximum ethanol content approved for sale for use in all vehicles.
Because gasoline demand has declined in recent years and ethanol targets have continued to rise, the blend wall is approaching much faster than anticipated. The required volumes of ethanol as set by the RFS must now be added to a smaller-than-expected pool of gasoline; many experts predict the 10% blend wall may be reached as soon as this year. While blends containing up to 10% ethanol (E-10) have long been used, refiners may need to start producing E-15 to stay in compliance. The approaching blend wall raises several issues for producers, refiners, auto manufacturers and fuel retailers. The white paper examines these and poses a number of questions for discussion.
The committee is requesting interested stakeholders to send responses to these questions by April 5, 2013.
Perspective: Total gasoline consumption this year is estimated at 134.8 billion gallons. At that, every gallon of gas would have to be a 10% ethanol blend to hit 2013’s mandated 13.8-billion-gallon usage. RINs would account for the remaining “use.” This year’s ethanol production, however, is on pace to hit about 12.6 billion gallons and grain-based ethanol use will be about 12.3 billion gallons, forcing RIN inventory down about 1.5 billion.
Follow Pro Farmer Editor Chip Flory on Twitter: @ChipFlory
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