So Much for the End of The Cold War

By Doug Durante, Clean Fuels Development Coalition

Do we laugh or cry when we hear the president of the American Petroleum Institute (API) say the “Cold War” between ethanol and oil is over as the two industries are “uniting” to fight EVs? Having a common foe is not “uniting.” Ethanol can make up for failures in the EV sector and do it by replacing the harmful components in gasoline. And while this insinuation of a cozy relationship is being bandied about, the petroleum industry is keeping lawsuits going that now have them jumping for joy as the U.S. Court of Appeals has overturned the EPA denial of small refinery waivers from 2022.

In a Radio Iowa interview, API says they have ended their opposition to year-round E15, as if it is some great and grand gesture and when you hear them say it, it is almost as if they are waiting for applause, or perhaps a thank you – how nice of them to allow competition. Now, you may hear objections that the API for the most part represents the retail end of the business and the real opposition is coming from the refiners through the American Fuel and Petrochemical Manufacturers Association.

And I get that – the oil industry is not monolithic and there are plenty of companies using ethanol and supporting it, but their trade associations have in fact been mortal enemies to ethanol, fighting against every drop. The small refinery waiver issue is just one example but a particularly bitter one. The law allows for a waiver if a refinery can demonstrate significant economic harm from the RFS. Waivers have been granted, overturned, granted again and overturned again. This most recent decision reverses the last denial of ’22 waiver requests. It is not clear yet how many gallons of ethanol will be affected but it is not an insignificant amount. So here we go again with the ethanol industry now having to take legal action and use up political capital.

This whole waiver issue has always puzzled me. The refineries claim the hardship is that they have to purchase RINS, which have varied greatly but only in rare instances have been more than the price of a gallon of ethanol. It is their choice to not buy and use ethanol. If they did, they would enjoy the margins that come from ethanol costing less than gasoline. So, they don’t want to buy ethanol and they don’t want to buy a RIN, then they scream from the rooftops that it is causing great economic harm. The lower price of a gallon of ethanol they could buy not only has that positive margin, but it frees up a gallon of gasoline that they can then sell, also at a profit margin.

It’s worth remembering that the U.S. Congress passed the Renewable Fuels Standard (RFS) —twice—as an energy, environmental and economic stimulus program. In doing so, it codifies that it is the policy of the United States, for the good of the country, to require a modest mix of renewables into our transportation fuels. In light of this fact, the calculus for granting any waiver should be extremely rigorous.

Since the advent of the RFS, I have always felt a great analogy in terms of policy are the many requirements under the Americans with Disabilities Act. Among many other provisions, it requires most buildings to provide wheelchair accessibility and other similar improvements. Would we stand by if building owners refused to provide such improvements simply because they said it cost too much? That it’s inconvenient? That they don’t like it? What’s next – refusing to pay taxes? Not stopping at red lights?

The RFS has done everything and more it was intended to do. For all the moaning and groaning we hear about high gas prices, ethanol has kept those prices from being far worse. If EPA let us blend at higher levels it would be even better. I traveled through rural Pennsylvania last month and saw E15 consistently 20-25 cents lower than E10. And both were 70 cents or more lower than E-zero.

But back to the cold war. I view the API statements with great skepticism. These same Pennsylvania stations that literally make the case for ethanol as a lower-cost fuel were also advertising “Ethanol Free Gas” with huge signs, and we see that throughout the country. In the interview, the API president said they want to, “Ensure American consumers have access to the fuels that they depend on every single day.” Well, we have been trying to have access to E15 and higher blends for decades. In fact, the fuels that we “depend on” are increasingly premium fuels that an E20- 30 could provide at a much lower cost than they can.

So I would not sell my winter coat quite yet, the “Cold War” is far from over and when the petroleum industry stops suing over every ethanol initiative (a new one was just filed in August to block cellulosic ethanol volumes), maybe we can take them at their word.