The US Renewable Fuel Standard and repeal, reform: The Digest’s 5 Minute-Guide

Diversifying the fuel supply

Joe Jobe, CEO, National Biodiesel Board

Many today have focused on concerns about the blendwall and E-15, but I would like to take this opportunity to remind everyone that biodiesel is an Advanced Biofuel under the program that is exceeding volume requirements. Our industry, in fact, has cracked the 1 billion gallon mark for two consecutive years, exceeding the volume requirements under the RFS in 2011 and 2012. And we are on pace to do so again this year.

In exceeding the minimum requirement under the RFS, our industry has produced more than 800 million excess biodiesel gallon RINs. This has given obligated parties a number of options, including the ability to use those excess gallons and RINs to help fill their conventional fuel requirements. In other words, a biodiesel gallon can be used to fill 1.5 ethanol gallons under the RFS.

Looking back, in 2004, before the RFS was put in place, our industry produced only 25 million gallons. This year, we are on pace to produce more than 1.5 billion gallons. We have registered capacity at EPA to produce more than 3.0 billion gallons, so our facilities are running at approximately 50 percent capacity.

Opponents of the RFS often try to assert that hydraulic fracturing and horizontal drilling technologies have provided access to domestic shale oil, and that these new domestic sources of oil will make us energy independent. Their argument is that we no longer need the RFS or to develop any alternative sources of transportation fuel because we are increasing domestic petroleum supply which will lead to cheap fuel prices for US consumers. This is a false argument because it assumes that crude oil is priced regionally rather than globally. The US is several years now into one of the largest domestic oil booms in decades, yet US consumer prices for gasoline and diesel fuel have remained high and unstable.

Canada is a net exporter of oil – completely energy independent. Yet Canadian consumers will be paying the same increased cost at the pump generated by [the] latest unrest in Egypt. The Canadian experience provides compelling evidence that as a country, you can be a net exporter of oil, but it will not insulate your citizens from paying whatever price the international market and OPEC decide they will pay.

As stated recently in the Wall Street Journal (July 10, 2013): “The return of geopolitical concerns to oil markets has dimmed hopes that a U.S. shale boom could put a lid on the prices motorists pay at the pump.”

The fact is that we simply cannot manage the global price of oil by increasing our own supply.

The only answer – which the RFS is gradually accomplishing – is to do what the electricity markets have smartly done: diversify our supply of fuels and build capacity. Coal, natural gas, nuclear, hydro, geothermal, wind, solar, and biomass all fuel our power plants, making our electricity prices stable and affordable. Clearly it makes sense to do the same in the transportation fuels market. We must also increase our refining capacity – and the only efficient way to do that in the near to midterm is through the ongoing development of biofuels.

In today’s Digest — a Great Compromise?;  The Blend Wall Issue; the RINs situation; is the Blend Wall and RFS-buster?; concerns about E15 ethanol; RFS impact on the food sector; diversifying the fuel supply; the real problems and immediate relief; and “a way forward?” – all by following the page links below.