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Big Oil Built the Blend Wall

June 8, 2022

E15, Flex Fuel E85, Markets


By Robert White, Vice President for Industry Relations


The last three months have delivered timely—and good—news for the ethanol industry, news that appears to be giving Big Oil an upset stomach.


First, after oil refiners sued the Environmental Protection Agency to block year-round E15, President Biden approved an emergency waiver to allow E15 sales to continue this summer to combat fuel shortages. And now, eight Midwest states are working to make year-round E15 a permanent option, bringing lower-cost fuel to their fortunate drivers. Second, EPA announced its renewable volume obligation for the 2020-2022 compliance years, along with what appears to be the end of small refinery exemptions.


For 2022, EPA’s announcement calls for 15.25 billion gallons of conventional biofuel, the highest volume ever. In a not-so-pleasant case of history repeating itself, we’re already hearing complaints from refiners about the 2022 RFS breaching the so-called “blend wall.” In case you’ve forgotten, refiners use the term “blend wall” to refer to what they view as the upper limit of feasible ethanol use in the United States, which they peg at 10 percent of the nation’s gasoline supply.


This purported blend wall is nothing other than a fictional construct created by the oil industry, as it has fought for years to contain the expansion of lower-cost, lower-carbon ethanol blends like E15 and E85. In fact, the U.S. ethanol industry has been breaching the phony “blend wall” since 2016, and we reached a record blend rate of 10.34 percent in 2021. While the 0.34 percent exceedance may not sound like much at first, it is actually a substantial amount of ethanol—nearly 500 million gallons in 2021.


Even as the “blend wall” built by Big Oil continues to crack, refiners are feverishly trying to add more bricks and plaster over growing fissures. Here are some ways refiners are trying to keep their blend wall intact:


  • Franchise Agreements: Oil refiners do not own many gas stations these days, but they franchise their brand to many retailers. In fact, about 40 percent of retail stations today sell fuel under the brand of a major oil company. These retailers are only allowed to purchase fuel from the franchiser (i.e., the oil company), which means if the refiner doesn’t want E15 or E85 sold, it doesn’t happen at these stations.
  • Supply Agreements: This approach is very similar to the franchise agreement but doesn’t require a franchise in which the retail station sells fuel under the oil company brand. In other words, these are independent retailers that enter into a long-term fuel supply agreement with an oil company. Given the high number of gas station owners that are single-station owners, they look to reputable supply companies for fuel. What is typically in these supply agreements is a minimum amount of fuel to be purchased by the retailer. Since many of these suppliers refuse to recognize E15 and/or E85 as an approved fuel, if the retailer adds them anyway, any sales of those two products will compete with volumes of contracted fuel and may jeopardize the retailer’s ability to meet its minimum requirement, often resulting in penalties being assessed.
  • Terminal Operators: More than 300 terminals offer pre-blended E15 today, but that also means hundreds do not. This means that retailers who want to offer E15 but pull fuel from terminals that don’t offer it would have to blend E15 onsite—and many are not equipped to do so. Since both ethanol and gasoline are stored at every terminal, offering pre-blended E15 is simple and inexpensive for terminal operators. However, many refuse to do so and this is nothing more than a tactic to block more E15 from being offered to consumers, despite the cost savings.
  • Advertising and Signage: Many franchise and supply agreements allow retailers to only advertise branded fuels that are supplied by the oil company, or they require retailers to “warn” customers that E15 and E85 are not branded fuel products. If these agreements allow retailers to advertise the availability and price for E15 or E85, those prices typically appear at the bottom of the price marquee or even on smaller, non-digital “flip signs” that are not part of the main price marquee (and are often obstructed from the view of passing cars).
  • Legal Maneuvers: E15 was approved for year-round use in conventional markets under the Trump Administration. The oil refiners filed a lawsuit and ultimately won that case, again blocking E15 from June 1 to September 15. This year, with potential fuel shortages and record gas prices (and record oil refinery profits), E15 was granted an emergency waiver for the summer. In fact, the reason the 2022 volume is 15.25 billion and not simply 15 billion is because the oil industry years ago secured an illegal waiver from the EPA for 500 million gallons, and the courts ordered it restored. It’s being spread between 2022 and 2023.

These barriers—or bricks in the blend wall—were discussed in greater detail in an RFA report published in 2014. Unfortunately, not much has changed since then.


As refiners complain about the “blend wall” and the price of compliance credits—or RINs—they have only themselves to blame. Without their legal action to block E15, there would be a significantly stronger E15 presence in the marketplace. More ethanol blending makes more RINs available, and at a lower cost. That’s how the system is supposed to work and how it encourages the industry to provide a liquid fuel that’s fundamentally superior to its alternatives, lowering emissions while supporting the rural economy and energy security. All this, at a lower per-mile cost to drivers, too.