Bring Competition Back to Gas Stations by Fixing the Renewable Fuel Standard...

Bring Competition Back to Gas Stations by Fixing the Renewable Fuel Standard (RFS)

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By Representative Greg Porter, IN; President, National Black Caucus of State Legislators

Minority communities across the United States have learned by experience to stay vigilant. It seems like there’s always something coming around the corner that poses a new threat to communities of color—sometimes from even the most unexpected sources. The U.S. Environmental Protection Agency’s program to cut carbon emissions from gasoline is one of those unlikely sources.

The Renewable Fuels Standard (RFS), which encourages companies to blend biofuels like corn ethanol into gasoline, was designed in a way that creates opportunities for fraud and harmful side effects that disproportionately impact communities of color. Not that this was the intention when the plan was put together—but it’s the way it’s playing out. Here’s why.

The way it was constructed, big gas station chains and brand-name oil companies are cashing in on credits that refineries have to turn into the government in exchange for producing gasoline from crude oil. The fundamental flaw here is that a refinery is not the place where raw gasoline is blended with biofuels. In fact, if you blend biofuels into pure gasoline, and then send it down the road in a pipeline, the biofuels separate out before it arrives at its destination—leaving an unusable mix instead of blended gasoline.

The trick is to blend the gasoline close to the point where it’s sold to gas stations. Big gas station chains and brand-name oil companies own those blending facilities. They take the raw gasoline produced by a refinery, blend in biofuel, receive valuable credits for doing so, and then put it in a truck for delivery nearby. Now they’re sitting on a handful of credits that (unlike refineries) they don’t have to turn into the government, so instead they turn around and sell those credits for big bucks.

How could this possibly matter to minority communities? It matters in two important ways.

First, when you squeeze refineries by making them cough up cash for credits, the weaker among them might just close down. History tells us that even a single refinery closure is a surefire recipe for gasoline prices spikes. Who gets hurt when gasoline prices spike? You guessed it: low-income consumers and minority groups who must devote a large share of their earnings to basic needs, like gasoline.

While big gasoline convenience store chains earn excess cash from blending fuel and selling credits, small and independent gas station owners are left out of the game. The big guys use that windfall profit to knock their smaller competitors out of the way. They might be upgrading their stations, buying into your market, who knows. Whatever the case, the RFS program is negatively impacting independent gasoline station owners, and minority owners are feeling the pain.

The only real good news in this situation is that this can all be fixed, without throwing the whole program out the window. Its broad goal to reduce emissions is praiseworthy, and Indiana farms make a major contribution to biofuel production that helps achieve that goal. If the government moves the point of obligation, everyone would be equally obligated to comply with the program, and the government would not be creating winners and losers. And more ethanol from Indiana might be blended in a fairer program. Competition among gas stations would be brought back into balance, and incentives for gasoline price spikes that harm minority communities would disappear.

The problem is serious and the solution is simple. So let’s fix this.

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