Calling Big Oil’s bluff

I grew up in Iowa and witnessed E10, or fuel made with 10 percent ethanol, enter the marketplace. I watched ethanol displace methyl tert-butyl ether (MTBE) in California, the Northeast and then nationwide. And as crude oil prices continued their inexorable march from $20 per barrel to more than $100, I’ve seen E10 become the ubiquitous fuel in our nation. What does each of these things have in common? The oil industry said they couldn’t be done, and they were wrong.

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Not surprisingly, Big Oil is back to its old tricks, this time trying to convince Congress and the Environmental Protection Agency that the Renewable Fuels Standard (RFS) cannot work and should be eliminated.

To combat Big Oil’s monopoly on transportation fuels, the RFS requires refiners to gradually increase the amount of renewable fuels available to consumers over time. However, refiners now say it cannot be done. Once again, they are wrong.

We call this the Big Oil Bluff.

The Big Oil Bluff claims that blends above 10 percent ethanol cannot be sold — the so-called E10 blend wall. So, as the RFS increases, oil refiners can’t use more ethanol, and instead have no choice but to artificially reduce U.S. fuel supplies to meet the RFS percentage.

The Bluff’s logic maintains that less gasoline would spike prices and the threat of high gas prices would serve as the justification necessary for Congress or the EPA to eliminate the RFS.

There’s just one problem. The central argument of the Big Oil Bluff is the existence of a real E10 blend wall. However, the E10 blend wall does not exist. Increasing consumer access to lower-cost E15 and E85, 15 percent and 85 percent ethanol respectively, solves the problem.

Yet, Big Oil has not worked to expand consumer access to these fuels. In fact, the oil industry has engaged in a relentless effort to obstruct the introduction of E15 and undermine the RFS at every turn. Big Oil is attempting to erect a bogus blend wall, brick by brick, to protect its virtual monopoly over the transportation fuel marketplace.

So just what are some of the many bricks of Big Oil’s bogus blend wall?

• Oil refiners use branded contracts to prevent “independent” retailers from selling blends above E10.

• Oil refiners use their petroleum distribution monopoly to limit retailer/consumer fuel choice by refusing to make available the proper gasoline blendstock for E15.

• The oil industry uses trumped up anti-E15 automotive studies to undermine consumer confidence in E15.

• Anti-E15 lawsuits, legislation and third-party advocacy seek to reverse the EPA’s approval of E15 and are designed to delay retailers from offering their customers the option of E15.

• The oil industry attempts to scare retailers and consumers with exaggerated liability and warranty threats.

The oil companies’ systematic attack on higher ethanol blends is proof positive they never intended for the RFS to work. The simple truth is that if Big Oil would simply get out of the way and stop trying to build a bogus blend wall, there would be no problem.

Today, the Iowa Renewable Fuels Association urges Congress and the EPA to call the Big Oil Bluff. Do not reward the counterproductive actions and inactions of Big Oil with regard to RFS compliance. To do so would reward bad behavior, undermine the most successful energy policy on the books and turn back the clock on our energy security gains.

The RFS is not, and should not be, about accommodating the highest-profit scenario for refiners to the detriment of consumers. Oil and gas are vital components of an “all of the above” energy policy, but so are domestic renewable fuels. The RFS has begun to crack open the door of the petroleum monopoly to allow consumers access to alternatives. Additional choices and competition at the retail level are good for consumers.

Ethanol is cheaper, cleaner and higher performing than gasoline. That is why Big Oil is desperately trying to shut the door on E15. Big Oil knows that on a level playing field, it cannot compete with ethanol. Call the Big Oil Bluff.


Shaw is executive director of the Iowa Renewable Fuels Association.