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GAO: RFS increased gas pricesGAO: RFS increased gas prices

Price effects depended on costs to transport and store ethanol.

June 3, 2019

2 Min Read

The U.S. Government Accountability Office recently reviewed the Renewable Fuel Standard, which was intended to reduce greenhouse gas emissions.

What did GAO find?

The analysis found that the RFS was likely associated with modest gasoline price increases outside of the Midwest and that these price increases have diminished over time. The price effects depended on costs to transport and store ethanol.

Initially, the RFS caused increasing refining investment costs that over the long term decreased refining costs for gasoline.

What about the effect on greenhouse gas emissions?

Most of the experts interviewed agreed that, to date, the RFS has likely had a limited effect on greenhouse gas emissions. The effect has likely been limited because conventional corn-starch ethanol, which is a leading biofuel, has a smaller potential to reduce greenhouse gas emissions compared with advanced biofuels and because most corn-starch ethanol has been produced in plants exempt from emissions reduction requirements, thereby limiting reductions when plants were less efficient than they are today.

What about RINs?

EPA uses renewable identification numbers, or RINs, to regulate industry compliance with RFS requirements for blending biofuels into the nation’s transportation fuel supply. In GAO’s March 2014 report on petroleum refining, GAO noted that the RFS had increased compliance costs for the domestic petroleum refining industry or individual refiners. GAO reported that corn-based ethanol RIN prices had been low—from 1 cent to 5 cents per gallon from 2006 through much of 2012—but in 2013, RIN prices increased to more than $1.40 per gallon in July before declining to about 20 cents per gallon as of mid-November 2013. Since the March 2014 report, corn-ethanol RIN prices have experienced more periods of volatility. Most experts and stakeholders GAO interviewed recently stated that RINs had either a small effect on prices or no effect on prices, though a few disagreed. Finally, GAO’s past work, as well as EPA analysis, has identified several issues of concern with RINs, including possible fraud in the market and concerns about the effect on small refiners, price volatility, and the point of obligation.

Source: U.S. Government Accountabilty Office, which is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset. 

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