Untenable Renewable Fuel Standard Portends Oil’s Rise in Domestic Energy Market

Guest post by Daniel Smith, currently a Heritage Action intern. 

Two energy industries—one perennially vilified and the other persistently glorified—are currently hashing out their differences under the guise of an ongoing battle in Congress over pork barrel farm bills and food stamp spending.

Buoyed by a meteoric rise in supply, oil seems well positioned to outmaneuver the Environmental Protection Agency (EPA) and farmers’ unions supporting ethanol subsidies, as pressure to reform the Renewable Fuel Standard (RFS) continues to mount. Four months of bipartisan reviews conducted by Congress have created the impetus for the EPA to consider serious reform to the much maligned RFS.

With hydraulic fracturing and the use of deep-water technology becoming more widely accepted throughout the United States, the oil industry finds itself with somewhat of a good problem to have—more product than they know what to do with. Some would argue that a resultant weak demand leaves oil in the lurch until destinations for this rapidly growing resource can be determined. Gene McGillian of Tradition Energy postulates “North America is creating an avalanche of oil that doesn’t seem to have a home right now”.

Yet this temporary problem of creating equilibrium in a flourishing U.S. domestic energy market seems preferable to the challenges faced by the EPA and farmers’ unions seeking to maintain a national emphasis on biofuels. The impractical and lofty RFS, implemented by the EPA in 2007, has left a bloated ethanol industry with a long-term supply and demand problem with no clear resolution readily apparent.

Accordingly, the EPA has hastily reneged on previous requirements of the RFS, already proposing a reduction of the 2014 blending quota for corn-based ethanol fuel to appease industry leaders. This perhaps marks the beginning of the EPA’s acquiescence to considerable pressure from various refineries, whose findings have shown that injecting “more than the traditional ten percent ethanol into gasoline [would risk damages] to most car engines on the road today”.

As the novel appeal of renewable energies being used on a large scale has worn off in favor of practicality and economically viable measures, it would appear a seminal moment in the country’s energy future lies before us. Congress’ discussions during the August recess represent the first step towards reforming the Renewable Fuel Standard. As the EPA awaits stakeholder approval for its recent proposal, it remains to be seen exactly what the potential ramifications for renewable energy will amount to in the long term.

And with a recent report by NPR estimating that roughly “five million acres of land” once set aside for conservation have been necessarily degraded by the process of creating corn ethanol fuel, it is somewhat difficult to see renewable energy sources retaining their ‘clean energy’ moniker for much longer.

While there is no doubt that various forms of renewable energy will likely constitute a substantial part of the U.S. energy pie, the EPA’s impractical value estimation of corn-ethanol fuel—borne out in the simply untenable RFS—should serve as a cautionary tale to lawmakers and industry leaders alike. Unfortunately, the environmental and economic costs of producing renewable energy often outweigh the benefits. In this case, only a full repeal of the Renewable Fuel Standard can begin to mitigate the adverse affects of this misguided legislation. In order for the U.S. to maintain its new and noteworthy role as the world’s largest producer of oil and gas, oil must be given its due as the nation’s domestic energy product of the future.

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