Hearing the Facts on the Renewable Fuel Standard
Posted July 25, 2013
Over two days this week the Energy and Power Subcommittee of the House Energy and Commerce Committee heard concerns from scientists, poultry producers, automakers, drivers, restaurant owners, tool makers, store owners, environmentalists and the oil and natural gas industry about problems with E15 and/or the current Renewable Fuel Standard. Leading the charge the other way was the Renewable Fuels Association (RFA) with a simple message: our product is so great; the government should continue to force people to buy it.
While a dedicated (and exhausted) team is hard at work rebutting all of the RFA’s false claims, I would like to start with this one:
While several factors are responsible for the decrease in petroleum import dependence in recent years, the rapid emergence of ethanol production under the RFS stands out as a particularly important catalyst, largely eliminating the need for imported finished gasoline. Indeed, EIA cites “increased use of domestic biofuels (ethanol and biodiesel)” as a major driver behind the decrease in petroleum import dependence.
They handily provide a link where the EIA does indeed mention the increased use of domestic biofuels. Let’s have a look:
U.S. dependence on imported oil has declined since peaking in 2005. This trend is the result of a variety of factors including a decline in consumption and shifts in supply patterns. The economic downturn after the financial crisis of 2008, improvements in efficiency, changes in consumer behavior, and patterns of economic growth all contributed to the decline in petroleum consumption. At the same time, increased use of domestic biofuels (ethanol and biodiesel), and strong gains in domestic production of crude oil and natural gas plant liquids expanded domestic supplies and reduced the need for imports.So the RFA ignores what the EIA mentioned first, declining consumption. Since the RFA mentioned finished gasoline, let’s look at how that compared to consumption declines starting when the economy began to falter.
We see that a decline in consumption accounts for 89% of the decline in net imports. Now that is a “major driver” right out of the laws of supply and demand. Which we can understand the RFA being confused about, since their business model is based on government mandated demand, not consumer behavior.