Recent natural disasters, world events, and regional refinery disruptions have brought the need to protect American refining capacity front and center.
If the Biden Administration really wants to protect consumers against rising gas prices and fuel-supply disruptions, gimmicks like draining our strategic petroleum reserves will not do the trick.
President Biden should direct the U.S. Environmental Protection Agency to take the one move that could save consumers at the pump while protecting American fuel supplies: reform the Renewable Fuel Standard, or RFS.
Daily headlines highlight how America’s energy security has diminished. In the days leading up to Hurricane Ian, BP and Chevron cut offshore oil production ahead of the storm, which accounts for 15 percent of the nation’s crude oil production.
As a result, the national average for a gallon of gas immediately rose by 6 cents to $3.78 at the same time that national gasoline demand shot up by more than half million barrels per day.
Ohioans also experienced price shocks from events closer to home. Refinery disruptions in Indiana and Toledo led to a more than 20-cent per gallon price spikes almost instantly.
Our nation’s energy supply chain has already been weakened as a result of misguided domestic energy policy decisions and because of the ongoing crisis in Ukraine, so it’s critical that we do everything in our power to support domestic energy producers, and especially, our independent refiners.
The one tool the government had in the toolbox to both lower gas prices and protect American refineries is reforming the RFS.
The RFS mandates that transportation fuel sold domestically must contain a certain volume of renewable fuels. The program has certainly had benefits and has helped ethanol grow to make up 10 percent of the fuel supply, which is the maximum amount all infrastructure and engines on the road were built to handle.
However, skyrocketing costs for RFS compliance credits — Renewable Identification Numbers or RINs — are now putting domestic fuel supplies at risk without driving ethanol consumption.
Since the chemical make-up of ethanol prevents it from being blended into gasoline at a refinery and then shipped via pipeline, most independent refiners that do not own gas stations or large distribution terminals where ethanol can be mixed with fuel are forced to purchase RINs to demonstrate RFS compliance, no matter the price.
The volatile and sky-high cost of these compliance credits — that were intended to trade for just pennies — has already forced many independent refiners to spend more on compliance with the RFS than they do on salaries, benefits, maintenance, and utility costs combined.
Estimates show that RFS compliance is raising retail fuel prices by approximately 30 cents per gallon, more than the national gas tax.
Furthermore, the cost of RINs has contributed to eight refineries closing or announcing closure in the last two years alone.
All that has occurred without increasing the amount of ethanol in the fuel supply.
In fact, government data shows that the ethanol blend rate has remained constant regardless of the mandated volumes or RIN price.
This system in unsustainable. If left unchecked, more refineries could close, making our current energy crisis significantly worse and resulting in loss of skilled jobs.
The Northwest Ohio Building and Construction Trades Council, through its affiliated local unions, represents more than 17,000 construction workers who depend on the two refineries in our region to support themselves, their families, and our local economy.
When refineries invest in new capital or maintenance projects, they employ thousands of our skilled craft workers. Fortunately, there is an easy and commonsense solution to this dilemma.
By taking swift and immediate action to reform the broken RFS program, President Biden and his administration can protect the viability of our nation’s independent refiners and the tens of thousands of family-sustaining jobs they support — including hundreds in the Toledo region — while bolstering U.S. energy independence and national security.
At this critical juncture, failure to act could result in catastrophic job losses across the United States, along with a newfound dependence on foreign fuels — the exact opposite of the RFS’ original objective.
We cannot afford for our energy supply chain to hang in the balance and become unraveled by a single unforeseen catastrophe.
For this reason, I am calling on President Biden and Congress to work together to restore America’s energy security by fixing the RFS, before it is too late.
The writer is executive secretary-business manager for the Northwest Ohio Building & Constructions Trades Council.
First Published November 5, 2022, 4:00 a.m.
