US biofuel groups push E15 to counter rising prices

Biofuel trade groups are pushing for increased biofuel blending amid the Russian invasion of Ukraine, pointing to increased use of ethanol as one avenue through which the White House can lower high energy costs.

The biofuel trade group Renewable Fuels Association today called on the administration of President Joe Biden to increase blending of ethanol into US road fuel supply "in response to the ongoing Russia-Ukraine crisis." The trade group joined with five other like-minded groups in penning a letter to the White House calling for reinstitution of year-round sales of E15, gasoline featuring 15pc ethanol.

The letter marks another instance of lobbying calling for the White House to change its energy policies in view of Russia's invasion of Ukraine on 24 February. The situation in Ukraine triggered far-reaching financial sanctions that have complicated trade in Russian exports, leading at least one US refiner to swear off trade in Russian crude this week.

Energy prices have risen steeply, with Russian crude now unattractive to many buyers. Biofuel groups are now pointing to ethanol as one lever the Biden administration can pull to lower gasoline prices that reached a seven-year high of $3.61/USG at the end of last month

"As Russia's harmful actions in Ukraine continue and further sanctions are potentially imposed against Russia, oil prices will likely continue to rise, creating still higher consumer costs and threatening US energy and economic security," the RFA said in its letter. "Expanding the volume of American-made ethanol in the US fuel supply can help alleviate these issues, as ethanol is currently priced 70-80¢/USG lower than gasoline."

Prices for renewable identification numbers (RINs) — the credits refiners use to show compliance with the US Renewable Fuel Standard (RFS) biofuel blending regime — swung lower today on speculation that the White House could consider pausing enforcement of the mandates forcing refiners and importers to blend ethanol and other biofuels.

Current year ethanol D6 RINs fell by 4.25¢/RIN to 114.5¢/RIN, while 2022 D4 RIN credits were 10.5¢/RIN lower at 142.5¢/RIN closest to midday. Cellulosic biofuel D3 credits for the current compliance year were flat at 327¢/RIN. The Argus RVO — an assessment of the per-gallon cost to comply with the RFS — was down by 0.67¢/USG to 15.34¢/USG.

The US Environmental Protection Agency (EPA) is already conducting something of a policy makeover on the RFS, fueling forecasts that the Biden administration could look to pause the program altogether with energy prices at decade-plus highs. Pressure from trade groups representing US oil, gas and refining interests to loosen regulation around domestic energy production has also added to concerns around the stability of the RFS program, even if the Biden administration is unlikely to place a full pause on a program in step with its long-term goal to cut 50-52pc of greenhouse gas emissions in the US by 2030.

In December of last year the EPA proposed to lower mandated blending volumes for 2020 and 2021 in light of demand depression occurring in the wake of the Covid-19 pandemic and related restrictions. The agency has also suggested it could take a hardline stance against so-called small refinery exemptions that have historically freed refiners processing less than 75,000 b/d from having to blend biofuels into products added to US road fuel supply.

A final EPA rulemaking on 2020, 2021 and 2022 blending mandates is expected later this year.

By Dylan Chase