The Renewable Fuels Association (RFA) has outlined how the US Environmental Protection Agency’s (EPA) small refinery waivers have caused ‘clear destruction’ to ethanol’s demand and price.
Supported by new analysis conducted by the RFA, the report looks at how the increasing numbers of small refinery exemptions from the Renewable Fuel Standard (RFS) under former EPA administrator Scott Pruitt have affected both demand and price of ethanol.
EPA statistics show that 29 RFS waivers were handed out in 2017, up from 19 in 2016 and a mere seven to eight in the three previous years.
Days after the RFA report was posted, Reuters revealed that major oil corporation Chevron had also received a hardship waiver for a Utah refinery in 2017.
The RFA’s analysis is primarily based around the ethanol ‘blend rate’, or the average inclusion of ethanol in the US’ gasoline supply.
According to the RFA, the blend rate exceeded 10% in all but three months in the year of 2017, hitting a record-high of 10.8% in January 2018.
However, a slump began in February 2018, which the RFA attributes to exempted refiners and rumours and reports of the exemptions making their way into the market. The blend rate fell to 9.8% in February, then 9.7% in March and 9.5% in April.
Between February and June, the blend rate only exceeded 10% across one month.
After conducting a basic regression analysis, the RFA announced that the results showed an eight cents/gallon decrease in February and that this impact grew to 34 cents/gallon by June.
The RFA concluded that by multiplying the price impact by production, the industry’s revenues were cut short by $2.3 billion (€2 billion).
Summarising the argument, the RFA concluded by asking firms in the industry not to be ‘fooled’ by commentary and social media posts about the impact the EPA’s exemptions have had on the industry.