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NERA study concludes RFS program is broken and a threat to consumers

WASHINGTON, March 20, 2013 – The nation’s Renewable Fuel Standard is poised to do significant harm to consumers, the economy, and the nation’s fuel supply system, according to a new study by NERA Economic Consulting, API Downstream Group Director Bob Greco told reporters in a briefing this morning. 

“The Renewable Fuel Standard program is irretrievably broken,” Greco said. A study we commissioned from NERA Economic Consulting, an internationally respected economic analysis firm …found that, by 2015, the economic consequences of continued implementation of RFS would be severe, including:

        •     an almost $770 billion decrease in U.S. GDP; 
        •     a $580 billion decrease in take-home pay for American workers; 
        •     a 300 percent increase in the cost of diesel, and a 30 percent rise in the cost of gasoline, which could result in rationing
              and other disruptions in the transportation sector; and 
        •     the unintended consequence of encouraging export of refined products to comply with the law. 

“Any one of these outcomes is a crisis,” Greco said. “Taken in total they could cause significant economic harm to America’s economy. 

“The unrealistic volume projections and the law’s requirement that refiners purchase Renewable Identification Number credits to comply with the mandated, yet increasingly unattainable renewable fuel volume requirements may have already caused negative economic impacts. According to OPIS, the published price of RINs increased by 1,400 percent, this year and its only March. This could affect consumers. Rising RIN costs have increased refiner costs: for every dollar spent per gallon on the RINs market, the cost of making E10 gasoline rises 10 cents. The rising costs of RINs are putting pressure on refineries, and – consequently – could put upward pressure on fuel prices. 

“Ethanol and other renewable fuels have an important role to play in increasing America’s energy security, and are an important piece of our transportation fuel mix. But the federal RFS mandate is ill-conceived and continues to be inflexible. As a result, NERA projects that it will cause real-world damage. Because of the severe impacts predicted by NERA, API believes that Congress and the administration should act immediately.” 

API is a national trade association that represents all segments of America’s technology-driven oil and natural gas industry. Its more than 550 members – including large integrated companies, exploration and production, refining, marketing, pipeline, and marine businesses, and service and supply firms – provide most of the nation’s energy. The industry also supports 9.2 million U.S. jobs and 7.7 percent of the U.S. economy, delivers $85 million a day in revenue to our government, and, since 2000, has invested over $2 trillion in U.S. capital projects to advance all forms of energy, including alternatives.

Related materials:

Impact of the Blend Wall Constraint in Complying with the Renewable Fuel Standard

NERA Study

  • Biofuels
  • Economy
  • Safety