As prepared for delivery
Press briefing teleconference on NERA study
Robert Greco, API group director, downstream and industry operations
Wednesday, March 20, 2013
Opening statement:
Good morning everyone. Thanks for calling in.
The Renewable Fuel Standard program is irretrievably broken. That’s the conclusion of a study we commissioned from NERA Economic Consulting, an internationally respected economic analysis firm.
The NERA study, which we’ll send you at the end of this call, found that, by 2015, the economic consequences of continued implementation of the RFS would be severe, including:
- an almost $800 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 manufacturing 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, according ton NERA; taken in total they will cause significant economic harm to America’s economy and consumers.
The simple fact is the law cannot be amended in a way to prevent its harm and, therefore, should be repealed immediately – a goal API continues to discuss with Members of Congress.
Our message to policymakers is clear – the RFS is bad policy for anyone that drives a car, transports goods, or purchases products that rely on gasoline – in other words, virtually everyone.
While API continues to press for full repeal, we understand that will take time. And in the meantime, NERA concludes, it is the consumer that could feel the pinch, in the form of higher energy prices.
That’s why we urge EPA immediately to reduce the total renewable fuels volume requirement and waive the cellulosic ethanol requirement for 2013.
Here’s why – 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. We have already seen the published price of RINs increase by 1,400 percent, this year. It’s only March.
This could affect consumers. Rising RIN costs have increased refiner costs: for every dollar spent per gallon of ethanol on the RINs market, the cost of making E10 gasoline rises 10 cents. The rising costs of RINs are putting enormous pressure on refineries, and – consequently – could put upward pressure on fuel prices.
What’s more, according to the NERA study, as the RFS volume requirements increase, the challenge of meeting them also increases. NERA predicts that eventually many refiners won’t be able to get the RIN credits they need because the credits are finite. At that point, according to NERA, they have no effective options and will be forced to reduce their biofuel obligation either by decreasing fuel production – with diesel fuel impacted first – or by exporting fuel, since exported gasoline and diesel aren’t subject to the RFS.
Bottom line, the NERA study points to a direct causal link between the RFS program, reduced domestic fuel supplies, and ultimately higher energy costs for consumers.
According to the NERA Study, this problem would only become worse as domestic gasoline supplies decline and more ethanol blending is required by the RFS. And the NERA study shows devastating consequences to the U.S. economy of sharp, sustained rises in fuel prices and of unstable supply.
Then there is the damage that higher percentages of ethanol blended in each gallon of gasoline could cause in millions of cars on the road today … and the use of higher ethanol blends, such as E15, could void warranties in all but the newest, most advanced engines.
Research by the Coordinating Research Council shows that more than 10 percent ethanol could damage automobile engines and other internal combustion equipment, and damage fuel systems as well.
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 if Congress and the administration don’t act immediately.
To that end, to protect consumers, refiners and thousands of businesses, we urge Congress to repeal the RFS mandate. To help right now, EPA should reduce the 2013 renewable fuel volume requirements and waive the 2013 cellulosic requirement.
Now, I’d be happy to take your questions.