WASHINGTON, March 20, 2013 – The nation’s Renewable Fuel Standard is poised to do serious harm to consumers, the economy, and the nation’s fuel supply system, according to a new study by NERA Economic Consulting, API Downstream Group Director Bob Greco told reporters in a briefing this morning:

“The Renewable Fuel Standard program is irretrievably broken. That’s the conclusion of a study we commissioned from NERA Economic Consulting, an internationally respected economic analysis firm. The study…found that, by 2015, the economic consequences of continued implementation of RFS would be severe, including:

• an almost $800 billion decrease in U.S. GDP;
• a $580 billion decrease in take-home pay for American workers;
• a 300 percent increase in the cost of manufacturing diesel, and a 30 percent rise in the cost of making gasoline, which could result in rationing and other disruptions in the transportation sector; and
• the unintended consequence of encouraging export of refined products to comply with the law.

Any one of these outcomes is a crisis; taken in total they will cause significant economic harm to America’s economy and consumers, according to NERA.

“The unrealistic volume projections and the law’s requirement that refiners purchase Renewable Identification Number credits to comply with the mandated, yet increasingly unattainable renewable fuel volume requirements may have caused the published price of RINs to increase by 1,400 percent, this year. It’s only March. This could affect consumers. Rising RIN costs have increased refiner costs: for every dollar spent per gallon on the RINs market, the cost of making E10 gasoline rises 10 cents. The rising costs of RINs are putting pressure on refineries, and – consequently – could put upward pressure on fuel prices.

“Ethanol and other renewable fuels have an important role to play in increasing America’s energy security, and are an important piece of our transportation fuel mix. But the federal RFS mandate is ill-conceived and continues to be inflexible. As a result, NERA projects that it will cause real-world damage if Congress and the administration don’t act immediately.”

API is a national trade association that represents all segments of America’s technology-driven oil and natural gas industry. Its more than 550 members – including large integrated companies, exploration and production, refining, marketing, pipeline, and marine businesses, and service and supply firms – provide most of the nation’s energy. The industry also supports 9.2 million U.S. jobs and 7.7 percent of the U.S. economy, delivers $85 million a day in revenue to our government, and, since 2000, has invested over $2 trillion in U.S. capital projects to advance all forms of energy, including alternatives.

Related materials:

Impact of the Blend Wall Constraint in Complying with the Renewable Fuel Standard

NERA Facts Study Sheet