The Refiners Who Cried Wolf

The RFS creates competition that lowers fuel prices and reduces carbon emissions. Yet, refiners still complain.
By Geoff Cooper | May 11, 2021

It sure didn’t take long for the howling to start. President Biden had been in the White House less than a month, and already oil refiners were crying wolf about the Renewable Fuel Standard.

This is ironic because the refiners themselves had a large hand in the creation of compliance flexibilities under the RFS. Indeed, at their request, the RFS includes provisions allowing refiners to comply without ever physically blending a drop of biofuel. As an alternative to blending biofuels, refiners can purchase compliance credits—RINs—from other parties that blended more than their required share of biofuel.

Despite this, the refiners have never liked the RFS because it cracks open the monopolistic fuels market and allows biofuels to compete on a level playing field with the fuels they refine from crude oil, much of which still is imported from places like Saudi Arabia and Russia.

The result of the competition created by the RFS isn’t just lower fuel prices and more options for consumers; it’s also reduced carbon emissions and greater energy security. The policy has helped cut U.S. oil imports by 41% between 2006 and 2020, reduced carbon emissions by nearly 1 billion metric tons, and knocked at least 22 cents off the cost of every gallon of gasoline.

Still, refiners have attempted to scapegoat the RFS for every malady that has befallen them over the past decade.

The first cry of wolf came in 2013, when Delta Airlines subsidiary Monroe Energy blamed the RFS for the poor performance of its oil refinery in Trainer, Pennsylvania. In reality, high crude oil prices, antiquated technology and refining inexperience were the culprits behind Monroe’s struggles.

But rather than addressing those issues, Monroe looked for an easy way out. First, they sued the U.S. EPA, the agency responsible for administering the RFS. When that didn’t work, Monroe asked then-Rep. Patrick Meehan, R-Pa., and other Pennsylvania politicians to intervene with the White House and EPA. Ultimately, EPA caved to the pressure and lowered the RFS requirements for 2014 through 2016. EPA’s action was later struck down by the courts, but not before significant damage had been done to the renewable fuels industry.

The second cry of wolf occurred in 2018, when Philadelphia Energy Solutions absurdly blamed the RFS for its abysmal performance and decision to seek bankruptcy protection. United Steelworkers piled on, and even Sen. Ted Cruz, R-Texas, flew in to speak at an anti-RFS rally at the south Philly eyesore, the oldest refinery in the country.

But again, it was all a charade. A deep-dive analysis of the PES situation by energy policy experts at the University of Pennsylvania revealed that the refinery’s woes had nothing to do with the RFS and everything to do with the lifting of the U.S. crude oil export ban, poor management and century-old technology.

The latest cry of wolf comes from PBF Energy, which has a major refinery in Delaware. Its president told investors in February that the RFS and the rising cost of RIN credits would somehow accelerate “refinery closures and the loss of jobs.” PBF says it is “actively engaged in Washington in regards to the RFS program,” which most assuredly means they are again appealing to their elected officials, as well as the former six-term Delaware senator who now happens to occupy the White House.

PBF’s howls about the RFS are made even more unbelievable by the fact that there is no “sunk cost” associated with purchasing RIN credits. Even the American Petroleum Institute, Marathon Petroleum, and the Trump administration conceded this point. API says “RIN costs are largely recovered by refineries, both large and small, through the increased value of gasoline and diesel fuel they supply to the market.” And Wells Fargo argued that because RIN costs are recovered by refiners, “investors should not spend much time and effort on the risks to refining margins” posed by the RFS.

Likewise, the Biden administration and members of Congress should not spend any time or effort listening to the refiners crying wolf again about the RFS.

Author: Geoff Cooper
President and CEO
Renewable Fuels Association
202.289.3835
gcooper@ethanolrfa.org