EPA’s Renewable Fuel Standard: The federal regulation that’s pushing home heating bills even higher this winter
The global energy crisis crippling Europe, the UK, Brazil, India, and China has also reached America’s shores. As natural gas prices continue to increase, many reports indicate that “consumers could be in for a rough couple of months.”
With gasoline and diesel prices reaching record highs across the U.S. — due in part to the soaring compliance costs of EPA’s Renewable Fuel Standard (RFS) — millions of Americans may be paying their highest home heating costs in many years this winter. This will be an acute problem throughout the Northeast, where nearly 20 percent of households still rely on heating oil as the primary heating source for their homes.
In fact, for the average American household, the RFS is on track to add an extra $100 to heating oil bills this winter.
Given 5.5 million American households relied on heating oil as their main source of space heating fuel last year, more than 80 percent of which were located in the Northeast region, it’s estimated the RFS will add approximately hundreds of millions of dollars to U.S. home heating bills nationwide.
How is the federal biofuel mandate driving up home heating costs? It goes back to the unpredictable, unsustainable, and unproductive costs of “RINs.”
To demonstrate compliance with the RFS, domestic refiners and fuel importers must purchase compliance credits called “Renewable Identification Numbers,” known as RINs. RINs were initially created to track each gallon of biofuel from production to blending. Unfortunately, this accounting system has devolved into an artificial, unregulated market over the years.
As a result of this secondary market commoditizing RIN trading, RIN prices soared from an average of $0.10 each in January 2020 to a record high of $2.00 this past summer. With U.S. independent refiners spending billions of dollars annually just to purchase RINs, some have reported spending more on RINs than all other operational costs combined.
While this broken, unregulated trading system is bringing independent domestic refineries to the brink of closure, RIN prices are driving up operational costs. In fact, high RIN prices have essentially become a hidden tax on U.S. independent refiners and American consumers alike, adding approximately 20 cents more on every gallon of refined product.
Due to this hidden tax, the average American household with a 500-gallon heating oil tank will pay an extra $100 in already high heating costs this winter.
In the U.S. Northeast, where consumers used about 2.9 billion gallons of heating oil in 2019, that means the Renewable Fuel Standard is on track to add $580 million to consumer home heating bills this year.
The broken RFS is causing higher home heating bills at the same time working Americans are unable to pay any more into an already inflated economy. For the sake of working families — especially the millions of families in the Northeast region preparing for winter — President Biden must fix the RFS once and for all.
For example, President Biden could ensure EPA proposes a lower biofuel blend rate for 2020, 2021 and 2022 to help cool down the volatile RIN market. To go one step further, the president could implement even longer-term reforms, like allowing refiners to purchase fixed and low-price government RINs if they are unable to obtain cost-effective RINs in the market. In fact, EPA already does something like this for low-volume cellulosic biofuel.
With family budgets already stretched thin by rising consumer prices, and an administration with few other options to shield Americans from rampant inflation and the growing global energy crisis, President Biden has a clear opportunity to provide millions of American families with some relief on their home heating bills this winter by fixing the RFS.