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Washington has shelved indefinitely a planned overhaul of the national biofuels policy that sought to reduce costs for the oil industry, two sources told Reuters, saying the move was the result of pressure from corn states prompted by concern such an overhaul will reduce demand for ethanol.
The news comes after months of tough negotiations as the administration has found itself on a tightrope between the oil industry on the one hand, and the ethanol industry on the other, with their interests at odds.
U.S. refiners are obliged to add a certain percentage of bioethanol to the fuel their produce every year and earn or buy blending credits—renewable identification numbers, or RINs—that they must present as proof of their compliance with bioethanol fuel quotas to the Environmental Protection Agency.
Refiners, however, have been complaining that these quotas are costing them dearly, so one of the changes envisaged in the planned overhaul of the U.S. Renewable Fuel Program concerned bioethanol exports being included in the annual quotas.
For corn farmers, on the other hand, the more bioethanol refiners add to the fuel, the better: the biofuels policy has created a 15-billion-gallon ethanol market for them. But the new deal would have seen an increase in the sales of high-ethanol gasoline, Reuters notes, which would have benefited corn farmers.
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The conflict is likely to continue, with or without a deal. In an April story, energy industry commentator Robert Rapier noted that oil refiners have spent billions on compliance with the Renewable Fuel Standard. Valero alone said last year it had splashed more than US$1 billion on compliance.
Rapier also quoted anti-ethanol quotas lobbyist Tim Constantine as saying, “RIN speculation is driving the market and costing consumers at the pump” and suggesting that refiners should be entitled to RIN waivers that would cost a modest sum to alleviate the pressure and help to reduce gas prices at the pump.
For now, however, any change aimed at helping refiners reduce their RIN-associated costs has been frozen. In this oil versus corn match, corn has won the game.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.