I'll Show You A Relic!

Ethanol Producer Magazine

March 17, 2016

By Bob Dinneen

There’s a rather pernicious meme making the rounds on Capitol Hill lately—that the renewable fuel standard (RFS) is no longer relevant because America is now producing more oil through fracking. Oil company lobbyists are scouring congressional offices in a desperate effort to create the misplaced narrative that ethanol did nothing to make us more energy independent, that tight oil supplies from the Bakken are fueling a resurgence of the U.S. energy sector, and policies promoting renewable fuels are costly intrusions into the energy free market that hurt consumers and the environment. Seriously. I can’t make this stuff up.

Indeed, in his state of American energy speech last month, American Petroleum Institute president Jack Gerard doubled down on the oil industry’s attack on ethanol and the RFS, calling it a “relic of our nation’s energy past.” He’s whistling past the graveyard, of course, ignoring the fact that an oil glut they helped create is wreaking as much havoc on the stock market and the economy today as the oil shortage that caused prices to skyrocket to $140 per barrel in 2008. He’s ignoring the fact that 2015 was the hottest year on record, caused in large part by greenhouse gas (GHG) emissions from fossil fuels, which are exacerbated by fracking and tar sands. And he dismisses the fact we still import more than 45 percent of the oil processed by U.S. refineries, much of it from hostile nations that pose an existential national security threat to our homeland.

But here’s the point—the RFS was enacted to address several important policy priorities, not just energy security. It was passed at a time when corn farmers were selling their commodity for less than the cost of production and ag subsidies were necessary to avoid economic calamity. The RFS provided a value-added market that empowered farmers and allowed Congress to dramatically reduce farm program support. The RFS was enacted at a time when Congress was looking for effective programs to address climate change. The RFS has provided significant GHG benefits, reducing GHG emissions by more than 354 million metric tons over the course of the program. The RFS was passed in recognition of the fact that consumers benefit by competition. One analysis concluded the use of ethanol through the RFS reduced gasoline prices by about $1 per gallon. Even in today’s market, with the unusually low oil price driving gasoline costs lower than ethanol for the first time in years, ethanol remains a bargain for refiners and consumers because it is still the cleanest and lowest-cost octane source available.

API’s revisionist history notwithstanding, the RFS has also demonstrated its effectiveness in enhancing U.S. energy security. Net petroleum import dependence fell to just 25 percent in 2015, but would have been 32 percent without the addition of 14.7 billion gallons of domestically produced ethanol to the fuel supply. The surge in ethanol production has reduced gasoline imports from nearly 10 billion gallons in 2005 to almost zero today. Indeed, the ethanol produced in 2015 displaced an amount of gasoline refined from 527 million barrels of crude oil. That’s roughly equivalent to the volume of oil imported annually from Saudi Arabia and Kuwait combined.  Not a bad relic.

No, it is not the RFS that is a “relic of our nation’s energy past.” It is the very notion that prosperity can only be driven by petroleum without regard for the environmental, economic or national security implications of that dependency that is the “relic” world leaders need to recognize and relegate to the trash heap of history.

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