Who are the losers?
Independent Merchant Refiners and Small Refiners. These companies are forced to purchase costly RINs to comply with the RFS, putting them at a disadvantage against Big Oil. These include CVR Refining, Valero Energy, HollyFrontier, Alon Refining, Philadelphia Energy Solutions, PBF Energy, Monroe Energy, Western Refining, Ergon, Sinclair, Calumet Specialty Products, Kern Oil, CountryMark, Hunt Refining Company, Lion Oil Company, American Refining Group, Wyoming Refining Company and others.
Small Service Station Operators. The “mom and pop” stores that cannot blend their own fuel and are being taking advantage of by Big Oil and Big Retail. These larger companies are using their RINs profits to undercut them at the pump, driving them out of business.
The American Public. Not only will you pay more for fuel, but you may be forced to use a fuel that you might not want to buy.
According to Reuters, the top 10 U.S. independent refiners are to take a record hit on renewable fuel credits in 2016. They spent $1.1 billion on the credits in the first half of the year, just short of a record $1.3 billion in all of 2013. Bloomberg estimates these companies will spend more than $1.8 billion in 2016 to cover RINs costs.
RINs have become the single largest operating expense for many obligated refiners, such as CVR Refining. The company reported that it will incur as much as $250 million in RIN expenses in 2016. That’s double what CVR spent in 2015, and it exceeds the company’s total labor, maintenance and energy costs. In fact, it’s roughly double CVR’s labor costs.
In September, HollyFrontier told the EPA that its RINs expense surpassed its total payroll costs for the company’s 2,700 employees.
Valero, the world’s largest independent refiner, expects its RINs expense to nearly double in 2016. The company estimates it will spend as much as $850 million this year, compared with $440 million in 2015.
The EPA claims that the RINs cost is in the crack spread. Not so fast EPA – RIN prices move up and down independent of the crack spread. Take a look at the actual data here.
Small retailers, who make up the majority of your “mom and pop” gas stations, also are a victim of the broken RFS program. A recent study on the impact of RINs trading on small retailers pointed out that:
“… large retailers are using the RIN profit stream for retail expansion and acquiring a larger share of a limited market. Small retailers are losing both sales volume and stores to large retailers. In other words, small retailers aren’t just less profitable but they are going out of business due to their growing inability to compete with large retailers. As a result, the demise of small “mom-and-pop” fueling stations has accelerated, with more than 12,000 closing since 2007.”
The skyrocketing cost of RINs isn’t just hurting companies, it’s also hurting hardworking Americans. In September, Bloomberg reported that Phil Rinaldi, chief executive officer of Philadelphia Energy Solutions (PES), told employees in an email that PES plans to reduce personnel, cut health care benefits, freeze pension contributions and delay capital projects due to the cost of complying with the RFS – approximately $250 million in 2016.
What is happening to PES is the tip of the iceberg. How many jobs must be lost before the EPA takes action? Surely the intent of the RFS isn’t to force good companies to eliminate jobs, or worse, destroy businesses that are major economic engines in the numerous communities where their employees live and work. But that’s exactly what is happening.
The EPA must close the Blender Loophole by making ALL BLENDERS responsible for complying with the RFS. If the blender loophole were closed, blenders would have both a legal obligation and financial incentive to increase renewable fuel use – the same as refiners and importers – and the RFS would have a better chance of working as intended. This would benefit consumers, as well as the many companies involved in the program.