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James Burgess

James Burgess

James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also…

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Panic as June Deadline Nears for Ethanol Mandate

As the June deadline nears for a decision on the ethanol mandate, lobbying picks up momentum in Washington as ethanol struggles in a purgatory somewhere between free-market mechanisms and a regulatory environment.

Last week, representatives of the American Coalition for Ethanol hit the pavement in Washington, DC, for the annual Biofuels Beltway in March, hoping to pressure the Environmental Protection Agency (EPA) ahead of a June decision on the 2014 Renewable Fuel Standard for ethanol.

As market events spiral out of control for ethanol producers and bottlenecks slow shipments and create shortages, the Coalition wants to know how much ethanol oil refiners are going to be forced to buy this year.

In June, the EPA will have to set a floor for the amount of ethanol oil refiners will be required to blend into the mix for this year. In November last year, the EPA proposed reducing the 2014 corn ethanol requirement by 1.4 billion gallons to 15.2 billion gallons--a proposal that has had ethanol suppliers up in arms.

And the oil industry is fighting back with its own resources. This week, securities filings showed that ethanol blending credits cost refiners at least $1.35 billion last year—or three times the cost of 2012, according to a 31 March Reuters report based on disclosures from only nine refiners. The costs are related to the necessity of purchasing Renewable Identification Numbers (RINs), which are paper credits refiners have to use in order to meet quotes for ethanol blending.  

Reuters notes that Valero Energy Corp, the largest US refiner, spent around $517 million RINs in 2013, while

The industry is now worried that ethanol lobbyists could exert enough pressure on the EPA to revise the November proposal to reduce the blending requirements.

The problem is that the RFS set its parameters too far ahead and predictions are a tricky thing. Flexibility is necessary and this is being learnt the hard way and will certainly have repercussions and this initial lack of flexibility—of RFS ranges—was a policy misstep on the part of the Environmental Protection Agency (EPA).

By James Burgess of Oilprice.com

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  • litesong on June 17 2014 said:
    One problem NOT fully acknowledged of ethanol use in gasoline engines, is that ethanol needs high compression ratio (16:1) ethanol engines to efficiently extract the energy out of ethanol. In low compression ratio (9:1 to 11:1) gasoline engines, 10% ethanol blends lose 8% to 5% mpg as compared to 100% (non-ethanol) gasoline. Considering it is only 10% ethanol, the mpg loss is huge, showing the worthlessness of ethanol as used in a gasoline engines.

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