Fix the Renewable Fuel Standard to Lower Gas Prices and Support the Global Economic Recovery
To lower prices at the pump and support the global economic recovery, President Biden should exercise his administration’s existing authority under the Clean Air Act to ease the regulatory and financial burdens related to the Environmental Protection Agency (EPA)’s Renewable Fuel Standard (RFS)
As higher levels of inflation squeeze working families and threaten to undermine the economic initiatives at the heart of President Biden’s Build Back Better agenda, last week, press reports revealed that the Biden administration was launching new efforts to lower high gasoline prices.
In a speech at the White House, the president vowed his administration would use “every available tool” to monitor the market forces contributing to higher consumer gas costs:
“Today, my Director of the National Economic Council has asked the Chair of the Federal Trade Commission to use every available tool to monitor the U.S. gasoline market and address any illegal conduct that might be connected to or contributing to price increases at the pump while the cost of barrel oil is going down.
“We also made clear to OPEC — the major oil-exporting nations of the world — that the production cuts made during the pandemic should be reversed as the global economic — there as the global economy recovers, in order to lower the prices for consumers.”
In fact, the Biden administration has additional tools they can use more effectively, including assessing how its own federal policies are impacting gas markets.
Specifically, the administration can start by reviewing the added costs associated with EPA’s Renewable Fuel Standard, which mandates certain volumes of biofuel to be blended in our nation’s gasoline.
RINs are the compliance credits that America’s refiners must provide to EPA to prove compliance with the Renewable Fuel Standard mandate. The RIN market is unregulated. RINS are sold and traded without any government oversight — and now, the volatility of the RINs market threatens the viability of our nation’s independent refineries.
When the law was enacted in 2007, RINS were predicted to trade in pennies, and they were until 2012. Today, they’re trading closer to $2.00, hitting $2.00 for the first time in the program’s history earlier this summer. Many refineries are spending more now to purchase RINs than all other operating costs combined, which is unsustainable.
While this puts more of our nation’s independent refineries at risk of closure, these rising compliance costs under the RFS are also causing consumer gas prices to rise. In fact, the RFS is now essentially a hidden gas tax, adding an extra 30 cents per gallon — a cost that’s almost twice as high as the 17 cent per gallon federal gas tax, and the beneficiaries are big oil companies, marketers, and speculators, rather than the government and corn farmers.
At the same time, the Renewable Fuel Standard is necessitating higher demand for foreign biofuel, increasing our country’s reliance on foreign energy sources. According to an EIA analysis released earlier this year, the U.S. imported 31,000 barrels per day of biofuel in 2021, up 12 percent from the prior year. That’s 475 million gallons of foreign biofuel imported to meet Renewable Fuel Standard obligations, which was supposed to stop imports into the country to improve our energy security and independence.
President Biden and the EPA can help to lower consumer fuel prices and reduce our nation’s reliance on biofuel imports by reducing the ethanol blending obligations under the RFS.
Instead of asking foreign nations to ramp up oil production overseas, President Biden should use his own authority and help American industries and workers at home.
A bipartisan group of governors, state elected officials and members of Congress have already been calling on EPA Administrator Michael Regan, White House Chief of Staff Ronald Klain, and the president himself to lower the ethanol blending obligations under the Renewable Fuel Standard. This move would help lower gas prices while protecting thousands of high quality union jobs in Delaware, Pennsylvania, New Jersey and throughout the country. That’s a win-win.
President Biden should seize this win-win opportunity to lower gas prices, support the global economic recovery, and protect thousands of jobs.
Since the President’s announcement last week, it’s been reported that OPEC refuses to heed the Biden administration’s urgent call for increased oil output to meet higher demand in the U.S. And with this week’s Energy Information Administration (EIA) analysis that U.S. oil demand is on the rise, the Biden administration has limited options.
These are just some of the reasons why reforming the federal Renewable Fuel Standard should be a key component of the administration’s efforts to lower gas prices.