American gas prices could rise by as much as 9 percent by 2017, thanks to our country’s misguided biofuel mandate system. That’s the finding of the Congressional Budget Office (CBO), which noted that the quotas for biofuels blended into American fuel could also raise diesel prices by up to 14 percent over three years.For those of you unfamiliar with this boondoggle, here’s some background: American refiners are required to blend certain amounts of biofuel into fuel mixes, according to the 2007 Renewable Fuel Standard (RFS). But the targets set out by the RFS are more than the market can bear; increasing fuel efficiency and fewer miles driven have decreased fuel consumption to levels lower than expected. There’s a limit, known as a “blend wall”, to how much ethanol can be blended into gasoline, above which older engines can be damaged. With that cap, and lower gasoline demand, refiners are struggling to meet the RFS quotas, and they’ve had to buy up credits to stay compliant. Those credits, along with the need to purchase increasing quantities of so-called “advanced” biofuels as laid out in the RFS, mean higher prices at the pump. Reuters reports:
Breaching the blend wall would raise costs for the credits that oil refiners must acquire to comply with the renewable fuel program. If the mandate is not revised, compliance costs would raise E10 gasoline prices by 13 to 26 cents per gallon, and diesel by 30 to 51 cents a gallon by 2017, the report said.
There are bills working their way through Congress to repeal or reform the RFS. Let’s hope they pass, and quickly; the sooner this ill-conceived green policy nightmare is over, the better.