The governors of five U.S. states—Louisiana, Texas, Oklahoma, Utah and Wyoming—have asked the Environmental Protection Agency for a nationwide waiver exempting the oil refining industry from national biofuel laws to help it survive the current collapse in demand.
For context, the Renewable Fuels Standard (RFS) set by the EPA requires refineries to blend 15 billion gallons of ethanol in 2020, along with roughly 5 billion more gallons of other types of biofuels.
The coronavirus pandemic has sharply reduced U.S. demand for gasoline since the new RFS mandate was set in December 2019, and these states are contending that it’s no longer feasible for refineries to hit those target volumes.
Refiners can buy credits from those that exceed targets, but prices for blending credits have also recently tripled—thus raising costs for refiners.
The oil refining industry is being particularly hit hard by the global pandemic as it destroys energy demand, breaks transport supply chains and makes labor harder to come by. The waiver request places the Trump administration in a tough spot between two key constituencies—the oil and agriculture industries—in a general election year. Unfortunately, helping refiners with a biofuel waiver would be negative for U.S. farmers as it would in turn hurt both ethanol (corn) and biodiesel (soybean oil) demand.
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