Renewable Fuel Standards Hike Food & Gas Prices, Cost Jobs

September 27, 2013

The Renewable Fuel Standard (RFS) was established by the Energy Policy Act of 2005 which required 7.5 billion gallons of renewable fuel, such as ethanol, to be blended into gasoline by 2012. The RFS was expanded under the Energy Independence and Security Act of 2007 to apply to diesel. This law also increased the quantity of fuel mandated to be blended into fuel from 9 billion gallons in 2008 to 36 billion by 2022. The EPA enforces the RFS mandates and revises them every year. This year, the RFS requires a blend of 16.55 billion gallons of renewable fuel.

Americans for Prosperity opposes the Renewable Fuel Standard.

The RFS increases our food prices hurting hardworking families.
The RFS requires fuel producers to blend greater and greater amounts of ethanol, a corn-based product, into our transportation fuels. As a result, the price of corn has increased dramatically. Since 2005, corn prices have more than tripled. Corn is an essential ingredient for the production of animal feed on farms leading farmers to expend an additional $1.9 million per day on corn. As a result, these increased production costs are being passed to consumers in the form of higher food prices. The price of milk, eggs, meat, and other typical grocery store foods may have risen by as much as 68% as result of the higher demand fostered by this mandate. Last year, family food costs increased by approximately $2,000 increase driven by the RFS.

The RFS is damaging to our cars and drives up gas prices.
As the RFS expands, fuel producers will need to switch to an E-15 blend, gasoline with 15% ethanol. But, most vehicles are only designed to run on the E-10 blend. Using E-15 can cause car problems like damaged valves and valve seats, misfires, engine damage, and the destruction of a cylinder head, which costs $2,000 to $4,000 to replace. Additionally, because ethanol contains less energy than gasoline, consumers have to refill their tanks more often further stretching family budgets. Gas stations must now also build new pumps that dispense both E-10 and E-15 and blenders and refiners have to spend more money on Renewable Identification Numbers (RIN) to demonstrate compliance with the mandate to the EPA. NERA Economic Consulting found that the RFS will cause a 30% increase in gasoline prices and a 300% increase in the cost of diesel fuel by 2015.

The RFS destroys jobs and businesses.
Many animal and poultry farms have been forced to close all over the country because of the RFS’s mandates. RFS’ upward pressure on corn prices has dramatically increased the price of animal feed and other inputs. Numerous farms such as Zacky Farms and Central Coast Fryar Farm in California, and Allen Family Foods and Townsends in Delaware have all shut down plants, filed bankruptcies, and fired thousands of employees. The RFS also places too many burdens on gas station owners and refiners that could put them out of business. For example, in 2011, the EPA proposed to fine refiners $6.8 million if they did not comply with the 6.6 million gallon cellulosic biofuel mandate. The burdens are even higher for gas station owners—the majority of which are owned by small businesses. Installing E-15 dispensers costs $100,000, while the average gas station only makes $40,000 in profits per year.

Like this post? Chip in $5 to AFP