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Phillips 66 May Find the Renewable Fuel Standard Unstoppable Despite Herculean Effort to Stop It

May 9, 2013


Phillips 66 CEO Greg Garland took some shots at the Renewable Fuel Standard (RFS) at a recent ConocoPhillips shareholder meeting. He said the RFS was "unworkable". That's just silly talk. The RFS is a proven success having stimulated investment, created jobs, and significantly lowered our dependence on foreign oil. Darn impressive results for the first seven years of a seventeen-year program. Garland also claimed there was broad agreement that the RFS was an issue. Really?  A national poll taken in January of this year found that 64 percent of Americans queried supported the RFS over fossil fuels in order to reduce our dependence upon foreign oil and greenhouse gas emissions. Enough already with oil companies thinking they represent the average, hard-working American. The Average Joe doesn't make $2.1 billion a year and hasn't yet fallen victim to Stockholm Syndrome despite a lifetime of being held captive by a petroleum monopoly at the fuel station. Phillips 66 and its Big Oil brethren are desperate to stop the advance of ethanol. Demand for gasoline has steadily decreased and ethanol now represents 10 percent plus of a shrinking market. Ethanol is no longer a quaint Corn Belt nuisance; it is now a viable fuel choice that offers drivers lower costs and a cleaner environment. Does the fear mongering by Phillips 66 make more sense now? Of course, a petroleum CEO is going to pledge to a roomful of shareholders that oil companies will stop anything and anyone that gets in the way of profits and dividends. Make no mistake about it; Big Oil will fight dirty and desperately to protect its monopoly. Let's talk about how desperate the attempts to stop ethanol have become. For many years, a ConocoPhillips franchisee, Zarco 66 in Kansas, offered E85 at its stations. E85 was blended on site using a blender pump to mix 15 percent gasoline with 85 percent ethanol. That offering didn't really bother the oil companies who treated E85 as a gimmick knowing that only flex-fuel cars could use the product. No threat to the monopoly. But shortly after this same franchisee became the first fueling station in the nation to offer E15, the oil industry suddenly changed its tune. ConocoPhillips quickly threatened to terminate Zarco 66's franchise agreement and charge it hundreds of thousands of dollars in penalties unless it started offering "premium" gasoline. This requirement in effect ended Zarco 66's ability to blend either E85 or E15 at the station... and hurt business. While premium gasoline is not in high demand in rural Kansas (~3 percent of sales), consumers do want choice at the pump, like E15 and E85, which represented more than 30 percent of this marketer's sales. It is one thing to mock the law that created the Renewable Fuel Standard, but it is quite another to strong arm a franchisee to a point that may run afoul of the Sherman Anti-Trust Act, the Gasohol Competition Act of 1980, and the Petroleum Marketing Practices Act. This is one small business owner in one state. What happens to the "little guy" as E15 rolls out in Nebraska, Iowa, Wisconsin, Illinois and Missouri? The success of the RFS is undeniable. The promise of ethanol is unstoppable. And based on the true story above, it appears that only ConocoPhillips and its Big Oil brethren are "unworkable".