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Why the RFS is Safe for Now

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Petroleum and livestock groups have petitioned the EPA to set aside the RFS because of the drought-shortened corn crop.   While corn yields are down, production is still forecast to be high enough to satisfy demand and keep prices under $8.  AFBF energy specialist Andrew Walmsley said another factor that will keep the RFS in place is that this is an election year and waving the RFS would increase gas prices, something the White House does not want to happen, “There’s a variety of studies out there that show that ethanol does reduce gasoline prices whether it’s by decreasing demand for oil, that ethanol is cheaper than gasoline and we blend that in; and there’s a wide range of numbers anyone can point out on how that reduces prices to the consumer. So the impact is huge.”

 

Studies have shown that elimination of the RFS would have only a minor impact on corn prices; and, since ethanol is currently cheaper than oil, ethanol would continue to be blended into gasoline even without the RFS.  A new study released by the University of Missouri Food and Agricultural Policy Research Institute found that a 2012-13 waiver could potentially have less impact on this year’s corn prices than it would on 2013-14 corn prices, according to the group’s baseline models. But, for this marketing year, the report projected prices to fall 0.5%. The study also found corn ethanol production might slip by 1.3%. Bob Dinneen, Renewable Fuels Association president, said the analysis showed the waiver impacts as suggested by livestock producers and grocery manufacturers won’t come to fruition.

 

Another factor that will keep ethanol in the mix is the new higher millage requirements for automakers. Robert White, with the RFA, says car makers can only get better gas millage by more ethanol in the tank, “To get the 54 mpg that will be required, automakers says they will need fuel with higher octane, perhaps as much as 100 octane.” White says ethanol is the easiest and cheapest way to boost octane in gasoline.  He added, in the future, gasoline will need to contain 20% ethanol in order to get cars up to the new higher millage requirements.

 

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