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The Environmental Protection Agency has proposed reducing the amount of biofuels that oil refiners are mandated to add to petroleum fuels in a bid to provide some breathing space to the refining industry amid demand damage and high prices.
While it may seem that the move is a favor for the oil industry, the industry is not happy with it, Reuters has reported, adding that the biofuels industry is also unhappy, although for more obvious reasons.
"This decision is an about-face by President Joe Biden who campaigned on his supposed support for renewable fuels," said Senator Joni Ernst, a Republican from ethanol-producing major Iowa.
The American Petroleum Institute, on the other hand, said the EPA "would best serve the public interest by keeping compliance volumes feasible."
The volumes in question were brought down in the proposal to 17.13 billion gallons for 2020 retroactively, from 20.09 billion gallons previously. For 2021, the volume was set at 18.52 billion gallons, and for 2022, the amount of biofuels refiners would need to blend into their fuels was set at 20.77 billion gallons.
At the same time, the EPA proposed a rejection of as many as 65 requests for exemption from the biofuel mandates—these exemptions are granted to small refiners for whom it would be financially challenging to blend in the required amounts of biofuel into their gasoline and diesel.
The biofuels mandate is a permanently contentious issue for successive administrations as it requires politicians to juggle between the interests of the corn and the oil lobbies.
While the battle between refiners and corn growers is long-running one, this year, there's a new participant: the American Bakers Association. With rising prices for agricultural commodities amid continued supply chain disruptions, the chances are high that bread and other baked goods could also become more expensive. With corn an essential agricultural commodity used widely in the baking industry, earlier this year, the ABA started lobbying the Biden administration to either reduce or at least halt the rise in biofuel mandates.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com