Despite claims made in an escalating media campaign spearheaded by the petroleum industry, a newly released study says ethanol blending credits generated under the U.S. renewable fuel standard (RFS) are not a factor in rising fuel prices paid by consumers. Commissioned by the Renewable Fuels Association (RFA) and conducted by Informa Economics, the study found that ethanol delivers a net benefit to consumers at the pump, rather than driving up the cost of gasoline.
A critical Wall Street Journal editorial and subsequent statements from petroleum industry organizations have suggested that, despite lower crude oil prices, surging prices paid for Renewable Identification Numbers (RINs) have contributed to escalating prices at the pump. A RIN is a serial number generated by the blending of each gallon of renewable fuel into the domestic fuel supply as mandated by the RFS.
These serial numbers allow blenders to “bank” credits to offset shortfalls in EPA-set volumetric blending requirements at the end of the reporting year. While many of these credits are used by parties obligated to comply with the RFS, some are traded on the open market – the price of these credits rose sharply in the early part of 2013, leading to speculation that higher RIN prices was causing higher gas prices.
Not so, said the RFA, unveiling the new study March 26. Informa’s analysis concluded that RIN prices, when broken out per gallon of domestic fuel consumed, are likely contributing no more than $0.004 (four-tenths of one cent) to the retail price of a gallon of gasoline.
In fact, the study concluded, the net benefit of ethanol to consumers – even factoring in RIN prices – is saving consumers $0.04 per gallon, or an aggregate $5.5 billion in savings each year. The study’s authors noted that this net benefit does not take into account other indirect benefits to consumers, such as lower demand for crude oil and gasoline, or improved octane value of ethanol over gasoline.
Informa’s analysis suggested that higher gasoline prices can be explained by several factors unrelated to either the RFS or RINs. “There is a distinct seasonal pattern to gasoline prices and crack spreads,” the study concludes, suggesting that the increase in prices this year has been consistent with seasonal increases experienced in 2011 and 2012, when RIN prices averaged less than $0.3 per credit.
Editor’s Note: Read the entire Informa study here. For more on the RIN situation, read the April 1 edition of Feedstuffs.