In response to the latest Wall Street Journal editorial on the federal Renewable Fuel Standard (RFS), the Advanced Ethanol Council (AEC), part of the Renewable Fuels Association (RFA) sent a one-pager to the Journal editorial board entitled “RIN Credits for Dummies.”
The Journal editorial board argues that higher prices for RFS “RIN compliance credits” is driving up the price of gasoline, and alleviating this government-induced burden will bring prices down. But in classic form, the Journal leaves out a few important facts (as taken from “RIN Credits for Dummies”):
- A RIN is produced when a gallon of renewable fuel is produced. Oil companies can then split the RIN from the gallon when they buy the gallon of renewable fuel and sell it on the open market. So, in essence,the oil companies are buying and selling RINs to themselves and then complaining about it to the Wall Street Journal.
- Oil companies can either buy a gallon of renewable fuel to comply with the RFS or buy a RIN credit on the open market. Oil companies have indeed bid up the price of RINs over the last few weeks, but they are doing so voluntarily to avoid the alternative of adding more ethanol to gasoline. Ethanol is 65 cents cheaper per gallon than gasolinetoday.
- The oil industry’s excuse — that it cannot blend more ethanol because of the blend wall — is smoke and mirrors. Fifteen percent ethanol blends are approved for 75 percent of today’s vehicles which together account for 85 percent of miles traveled. It’s pretty simple; the oil companies will bury the truth and gouge the consumer to avoid blending alternative fuels.
- The oil companies helped design and openly supported the open market RIN credit program they are now using to attack the RFS. The problem for the oil industry is the RFS and RIN credits are working to reduce our dependence on oil, break Big Oil’s monopoly on the gas pump, and create American jobs while also reducing gas prices.
In essence, the RFS is telling oil companies (because fuel markets are not free markets) to blend more of a domestically-produced, renewable and cheaper fuel. The oil industry is responding by leaning too heavily on RIN markets to avoid blending more of a domestically-produced, renewable and cheaper fuel. Instead of sniffing out the facts, The Wall Street Journal carries the oil industry’s water to the general public. The RFS is not the problem, it’s the solution.