Washington – Recently, additional governors from livestock and oil producing states have added their support for the misguided attempt to derail the Renewable Fuel Standard. Responding to the most recent requests, which include letters to EPA from Texas Governor Rick Perry and Virginia Governor Bob McDonnell, Renewable Fuels Association President and CEO Bob Dinneen issued the following statement:
“The rash of governors rushing to appease the pleas of the livestock and food processing industries are ignoring the damage a waiver would do to consumers at the pump. Removing ethanol from our fuel mix would drive oil and gasoline prices higher, adding pain at the pump and increased cost at the checkout counter due to higher energy costs for farmers, food processors, and food transporters. These increases in gas prices would far outpace any negligible relief to food prices from a waiver. The alleged economic harm cited by these governors does not rise to the kind of economic harm EPA determined necessary to waive the RFS. The facts cited in support of their case also fail to pass muster.”
Much of the handwringing ostensibly stems from a concern over consumer food prices. In an analysis by RFA VP for Research and Analysis Geoff Cooper posted today on the RFA blog, the slight decrease in corn prices that might result from a waiver would have only a marginal impact on the prices paid in grocery aisles. Conversely, eliminating some ethanol consumption under an RFS waiver could drive American household gasoline bills much higher – even higher than the gouging occurring as Hurricane Isaac approaches. Cooper estimates food costs for the average American family might fall by $3-$9 in 2013 with a waiver of the RFS, but gasoline costs could be as much as $88 higher over the course of the year.
“While this summer’s drought has undoubtedly caused billions of dollars in damages to the entire U.S. agriculture sector, the impact of the RFS on the average American household’s budget has been mischaracterized by waiver proponents,” Cooper wrote. “In fact, as this analysis shows, waiving the RFS requirements for 2013 would actually result in a net increase in annual household spending of approximately $24-$85 due to increased spending on gasoline. The increase in household gasoline expenditures that would result from an RFS waiver would far outweigh the nearly imperceptible reduction in food prices. Thus, waiving the RFS in 2013 would do more harm to American consumers than if EPA allows the program to continue to function as designed.”
“The RFS is working,” said Dinneen. “A wide variety of compliance mechanisms are currently at work allowing oil refiners to meet their obligations under the program. Simultaneously, the market is taking advantage of these flexibilities in the RFS to reduce ethanol production and subsequently the industry’s use of corn. Ethanol production and corn use are down nearly 15 percent and could fall further if the market demands it. An abundance of excess RFS credits accumulated in the past two years as a result of overcompliance with the program alone make any waiver of the RFS unnecessary at this time.”
The entire blog can be read here.