THE war of rhetoric between the renewable fuel industry and the petroleum industry has intensified, with one side trumpeting an ethanol-critical Wall Street Journal editorial and the other calling for a multi-agency investigation into the oil sector's "highly discriminatory and unlawful conduct."
Starting with a March 11 report from the Wall Street Journal claiming that renewable identification numbers (RINs) are partly to blame for the rising cost of gasoline at the pump, the two sides got locked in a heated public relations battle.
RINs, essentially a credit issued to blenders for every gallon of ethanol included in the nation's fuel supply, have skyrocketed in value in recent weeks as refiners bought more and more credits to meet volumetric requirements under the renewable fuel standard.
A report from Bloomberg News claimed that drivers could face a $13 billion increase in the cost of gasoline this year because of the higher cost of RINs.
Renewable fuel advocates, meanwhile, said the math behind those startling claims simply doesn't add up (sidebar).
"RIN prices are not the cause of high gas prices," Growth Energy chief executive officer Tom Buis said. "What's driving the recent record highs are the record profit margins the oil industry is profiting off of, currently at more than $1/gal. This is because the oil companies have a near monopoly on the marketplace."
Buis said there is no shortage of RINs for 2013, and blaming ethanol for higher gasoline prices is "blatantly false." Instead, he said oil companies continue to prevent non-petroleum alternatives from entering the marketplace, namely by obstructing adoption of E15, a 15% ethanol fuel blend.
"The reason we're even having this discussion on rising RIN prices is because the oil companies are flat-out unwilling to blend ethanol and, instead, are willing to pay a premium specifically not to do their job under the law: blend renewable fuels," he said. "They are fighting to maintain the blend wall and are willing to let RIN prices increase as they continue to erect every hurdle possible to maintain the blend wall and their monopoly in the liquid fuels market."
In response to the Journal editorial, the Advanced Ethanol Council put a finer point on the situation, explaining that a RIN is produced when a gallon of renewable fuel is produced. That credit can then be sold on the open market separately from the gallon of fuel that created it.
"In essence, the oil companies are buying and selling RINs to themselves and then complaining about it to the Wall Street Journal," the council claimed, pointing out that ethanol is currently priced 65 cents/gal. cheaper than gasoline. Blenders are voluntarily bidding up the price of RINs, the group claimed, to avoid adding more ethanol to the fuel supply beyond the so-called blend wall.
The Renewable Fuels Assn. (RFA) took the war of words to federal regulators, requesting a multi-agency investigation into oil industry conduct that RFA claims is impeding the delivery of renewable fuels to the marketplace.
In a letter to the Environmental Protection Agency, the Federal Trade Commission and the departments of energy and agriculture, RFA accused the oil industry of violating multiple federal statutes and regulations in coercing or constraining retail fuel marketers from selling higher-percentage blends of ethanol.
Recounting the story of ConocoPhillips franchisee Zarco 66 in Lawrence, Kan., RFA claimed that after the station announced that it would be the first in the country to offer E15, the franchisor "quickly threatened to terminate the franchise agreement and charge Zarco 66 hundreds of thousands of dollars in penalties."
RFA said while the station had blended E85 for years using a blender pump obtained through a U.S. Department of Energy grant without protest from the oil company, following the E15 move, ConocoPhillips demanded that the station sell premium gasoline as a precursor for selling regular unleaded -- something RFA said violates U.S. antitrust law.
"Here, the oil industry is forcing fuel stations to purchase and carry a product that they otherwise do not wish to carry (premium gasoline) as a condition for purchasing and carrying the tying product (regular gasoline)," RFA explained. "Because franchisees are locked into franchise agreements, an oil franchisor holds appreciable economic power over the franchisee, which it is using to force franchisees to purchase premium fuel that they might not otherwise carry."
Because premium gasoline requires a separate tank, station owners face a stark choice: either install an additional tank at considerable expense, or use existing tank space to sell premium gasoline instead of ethanol.
With gasoline prices nearing $4/gal. and the busy summer driving season still months away, the war of words between the nation's two fuel industries is unlikely to die down soon.