During a recent segment on CNN, National Economic Council (NEC) Director Brian Deese correctly cited lost domestic oil refining capacity as a prime driver for high pump prices. However, instead of describing any plan supporting U.S. refiners, Mr. Deese pledged the Biden administration is, “trying to work around the world wherever there is spare refining capacity.”
Rather than scouring the globe for spare refining capacity needed to turn oil into gasoline, diesel and jet fuel, the administration should look to American refiners. The Administration should use the one tool in its toolbox to lower prices at the pump, while protecting this country’s remaining refiners and their workers. Specifically, the president needs to lower the federal biofuel mandate.
For years, America’s independent refiners, and the workers who run and maintain them, have been calling on the federal government to save refineries from buckling under the out-of-control compliance costs associated with the Environmental Protection Agency’s (EPA’s) Renewable Fuel Standard (RFS).
While the RFS initially aimed to shore up America’s energy security, over time it has morphed into a regulation that is squeezing domestic energy production, the direct opposite of its original intent.
Since 2019, the U.S. has lost more than 1.2 million barrels per day of refining capacity. Almost 400,000 barrels per day of that capacity has been closed and converted to renewable diesel manufacturing, specifically to help refiners meet their obligations under the RFS or similar state-level regulations. When converted to manufacturing renewables, these plants only make 25 percent of the fuel they produced as petroleum refineries with only about 10 percent of the workforce, resulting is a massive net loss of fuel—the prime driver of rising pump prices—and thousands of blue-collar jobs.
The RFS mandates blending a certain amount of ethanol and other biofuels in refined fuel products. Each gallon of biofuel is tagged with its own unique Renewable Identification Number (RIN), which independent refiners purchase as a form of complying with the RFS if they are unable to blend their own ethanol.
A good idea on paper, the RINs system has fallen apart due to many reasons. The primary failure is attributable to EPA perennially setting unachievable ethanol volume requirements, creating a continuous scarcity of RINs. These credits are bid up to astronomical prices on a completely unregulated market controlled by multinational oil conglomerates, large convenience store chains and Wall Street speculators. As a result, many independent refiners have RINs bills that total hundreds of millions of dollars annually – more than operations, maintenance, and payroll costs – combined.
Many independent refiners have recently faced closure and could again in the future if the administration does not act to address these massive RIN cost exposures. The situation spells disaster for fuel prices, along with the tens of thousands of workers that these businesses directly and indirectly support.
Fixing the RFS would protect our remaining domestic refining capacity, saving thousands of family-sustaining jobs in the process and preventing even higher pump prices. Several experts agree that getting RINs under control could also shave 20 to 30 cents per gallon off consumer fuel costs. It’s a simple fix, which is partially why it’s so disheartening to hear Mr. Deese’s comments. It seems the Biden administration is looking to foreign competitors to fill out our empty domestic refining capacity, instead of supporting American independent refiners and thousands of working families.
Refiners in China and Saudi Arabia won’t solve our problems. Before the Biden administration goes around to foreign nations, begging them to come to our aid, the administration should pursue regulatory reforms to protect our own domestic independent refiners, who employ American workers and run the most environmentally friendly refining operations in the world.
Now is the time for the President to unshackle the power of domestic refiners to ensure they can continue the work of fueling out nation. Now is the time for President Biden to lower the Renewable Fuel Standard.