“Ethanol’s Lost Promise” Report Disputed

The ethanol industry is disputing the conclusions of a report titled “Ethanol’s Lost Promise” released this week by EPRINC, an oil industry-funded research group.

The report suggests a multi-year suspension of the Renewable Fuel Standard (RFS) could reduce U.S. ethanol use by more than half. To offset this loss in ethanol supplies, officials with the Renewable Fuels Association (RFA) note that the report recommend “a variety of economically impractical and politically infeasible options could be pursued—ranging from ramping up gasoline imports to reducing diesel fuel and heating oil production in an attempt to extract more gasoline from crude oil.”

RFA President and CEO Bob Dinneen pointed out that in attempting to tear down the RFS, the EPRINC report actually underscores the importance of the program and highlights the lack of sensible or economic options available to refiners if ethanol use is severely curtailed.

“If you do away with the RFS over the long term and less ethanol is available, as EPRINC is suggesting, you leave a gaping hole in the gasoline supply,” said Dinneen. “The options available to fill that hole just don’t make economic sense and would further increase fuel prices for consumers. Ironically, the EPRINC report actually underscores why the RFS is so important; it highlights the fact that cutting ethanol out of our gasoline supply would result in increased dependence on imported oil and refined products, or would force refiners to make a choice between maximizing gasoline or diesel production. Consumers lose in either case. Clearly, the best option is not to tinker with the RFS and let it continue to work as intended.”

Both Dinneen and Brent Erickson of the Biotechnology Industry Organization (BIO) point to multiple flaws in the EPRINC study. “Not least of which is the fact that EPA’s authority allows only a one-year waiver of the RFS,” said Erickson. “Moreover, the study assumes a scenario in which the petroleum refining industry circumvents the law’s intent to increase domestic production and use of renewable fuels by gaming the RFS’ system of Renewable Identification Numbers.”

Dinneen says there are internal inconsistencies regarding the report’s characterization of the flexibility of the RFS. On one hand, the report states that the RFS has “created inelastic demand for ethanol,” but then on the other hand, it acknowledges that ethanol production has plummeted by about 15% since the beginning of the year “…as high corn prices have caused many ethanol producers to idle production.”

Read the EPRINC report here.

Source: Cindy Zimmerman at www.domesticfuel.com.