BLOOMINGTON, Ill. — A scathing new report issued by the Renewable Fuels Assoc. (RFA) accuses Big Oil companies of manipulating the retail fuel market to block the sale of higher-volume renewable fuels such as E15 and E85 ethanol blends. The report was announced July 8 by RFA President and CEO Bob Dinneen along with Geoff Cooper, RFA senior vice president.
"Big Oil says they have no control over whether retail gas stations sell high-ethanol blends like E15 or E85 because they don’t own many (stations) and can’t control what station owners buy. They say they can’t distribute renewables as required by the RFS (Renewable Fuel Standard)," Cooper said.
"If you peel back the onion, what you quickly see is that oil companies do in fact continue to exert tremendous control and influence over what fuel products are offered at retail stations. They do this through highly restrictive franchise and branding agreements.
"They do this through highly prescriptive fuel supply contracts and a host of other, subversive tactics that essentially prevent or at least significantly discourage retailers from selling greater volumes of renewable fuels," he accused.
The study’s conclusions resulted in the issuance of an RFA Consumer Choice Report Card titled Protecting the Monopoly: How Big Oil Covertly Blocks the Sale of Renewable Fuels. The study examined the number of retail fuel stations in the United States, the percentage owned by a Top Five oil or refining company and the ratio of renewable fuel sales in each category.
It analyzed trends at approximately 150,000 retail fuel stations. "The study found that about one-half of the total retail fuel stations out there carried the brand of one of the Big Five oil companies – Exxon-Mobil, Shell, BP, Chevron and Conoco-Phillips.
"Of these stations, E85 or E15 is offered at far less than 1 percent of them," said Cooper, adding more than 25 percent of major independent retail fuel chains offer either fuel.
Another point of contention against Big Oil is the companies’ claim that a shortage of fueling infrastructure is a reason the U.S. EPA should lower the ethanol blending requirement of the RFS. Dinneen attempted to debunk that claim.
"With this report we wanted to shine a little light on narrative coming from the oil companies these days, that the U.S. market can’t possibly absorb more than 10 percent ethanol; that consumers don’t want it and won’t buy high-level ethanol blends; and of course, my favorite – that because the major oil companies have disinvested from their downstream blending operation, they don’t have any control over the (fueling) infrastructure or what is sold. All that is rubbish," he said.
"It’s a shame that EPA has bought into that in trying to determine the 2014 RVO (recommended volume obligations) for the 2014 RFS and beyond."
Dinneen said the facts prove a market for higher blends of ethanol exists and that the U.S. market can absorb more ethanol, but charges Big Oil simply won’t allow it. More than 15 million flex-fuel vehicles travel U.S. highways today, with 13 percent of 2013 models fully warranted for flex-fuel use. That number is expected to increase to 17 percent next year.
Add the fact the EPA has authorized high blends of ethanol (at least E15) for 80 percent of all vehicles on the road today (vehicles made after 2000), and "that’s the market Big Oil says doesn’t exist," Dinneen concluded.
Illinois Corn Growers Assoc. (ICGA) President Gary Hudson said his state is the perfect example of how oil companies control the gasoline marketplace, limit choice and make sure lower-priced fuels don’t make it to the pump. Ninety-six percent of the retail fuel stations offering higher ethanol blends are regional or independent petroleum marketers, he said.
"We see Big Oil’s monopolistic strategies here in Illinois every day," he said in response to the RFA report and Consumer Report Card. "The stations that are offering more consumer choice at the pump via E85 and E15 know a good thing when they see it. Those other Big Five retailers that are subject to contracts, licensing agreements and pressure from Big Oil just don’t offer these less expensive fuels."
The U.S. Senate Judiciary Committee’s antitrust panel is calling on the Federal Trade Commission (FTC) to investigate whether current oil industry contract and pricing strategies limit marketplace access to ethanol and harm consumers, according to the ICGA.
According to a Thomson-Reuters report, Sens. Amy Klobuchar (D-Minn.), who chairs the Judiciary panel, and Chuck Grassley (R-Iowa) said last week the report bolstered the case for the FTC to evaluate whether the oil industry has engaged in anti-competitive practices. They have pressed for almost a year for the probe. It is unclear if the agency has taken action on the matter, Reuters added.
The RFA report concludes by stating the only way to ensure consumers get access to renewable fuels is by forcing the EPA into compliance with the RFS, which calls for increasing amounts of renewable fuel to be blended into gasoline and made available to consumers. The Consumer Report Card can be accessed at www.ethanolrfa.org
