The Cure for High Prices

With high gas prices lingering, the RFA is continuing to advocate for a larger role for ethanol in the United States fuel supply. Recent actions by the Biden administration, like continued access to E15 this summer, give producers cause for optimism.
By Geoff Cooper | July 18, 2022

It’s been said that “the cure for high prices is … high prices.” In other words, when prices for a product rise to an unbearable level, consumers reduce consumption or stop buying the product altogether. In turn, supplies of the product increase and prices eventually fall.

But in the case of gas prices—which set a new record of $5 per gallon in June—there is a better cure available that won’t force Americans to cancel their daily commutes or abandon summer road trips. At gas stations across the country, the cure for high prices isn’t more high prices—it’s ethanol. Refiners and blenders can lower gas prices for consumers simply by adding more ethanol, which has been $1–$1.50 per gallon cheaper than gasoline for much of the summer.

However, refiners don’t make ethanol and they don’t like the idea of blending more, even though market forces suggest they should. Fortunately, the Biden administration has taken action this summer to compel refiners to increase the availability and use of ethanol—the antidote to record high pump prices.

Back in June, the Environmental Protection Agency took regulatory action to bring order and certainty to the Renewable Fuel Standard, giving our industry a solid foundation to grow production, boost energy security and expand the use of low-carbon renewable fuels. Specifically, EPA set the 2022 blending requirement for conventional renewable fuel at 15.25 billion gallons—the highest ever—and put an end to the abuse of the refinery exemption program.

The Renewable Fuel Standard reduces the price of gasoline in two ways. First, the RFS drives greater usage of ethanol, which is less expensive than petroleum-based gasoline (recently selling at a discount of roughly $1.50 per gallon at the wholesale level). Additionally, RFS compliance credits, known as renewable identification numbers, or RINs, are attached to each gallon of ethanol sold domestically. These are provided free of charge and help offset the blender’s cost of gasoline.

Second, the use of ethanol extends the overall fuel supply and reduces the consumption of petroleum-based gasoline, thereby lowering the demand for crude oil and refined products. In a 2019 study, Dr. Philip Verleger determined that by expanding fuel supplies, the RFS reduced the price of crude oil by $6 per barrel on average from 2015 to 2018. In turn, gasoline prices were reduced by an average of 22 cents per gallon, the equivalent of $250 annually for a typical household.

The EPA and the Biden administration are restoring integrity and stability to the RFS program after several years of mismanagement and abuse by the previous administration. The combination of a strong RVO for 2022, restoration of illegally waived volume from 2016, and a new direction for the small refinery exemption program puts the RFS program on solid footing for the future. We thank Administrator Regan and President Biden for honoring their commitments to implement the RFS in a way that is fair, transparent and focused on growth—giving us a great steppingstone for moving forward in the future.

In addition, President Biden, Regan and USDA Secretary Tom Vilsack worked to ensure lower-cost E15 is available all summer for consumers. Meanwhile, a group of Midwest state governors are also working to make year-round E15 permanent in their states. Summertime E15 will help lower the cost for consumers as they travel this summer and all year long.

Clearly, the cure for high prices at the pump isn’t more high prices. The cure is opening the market to higher volumes of ethanol and spurring competition. RFA will continue to lead and advocate for a larger role for ethanol in the United States fuel supply. We could not be more hopeful for the opportunities in the future as we continue moving forward, and the action we’re seeing from the White House this summer gives us cause for more optimism.


Author: Geoff Cooper
President and CEO
Renewable Fuels Association
202.289.3835
[email protected]