Ethanol Mandate May Boost Fuel Prices for Summer

WASHINGTON, D.C. -- The U.S. ethanol mandate could force gasoline prices to rise this summer, two U.S. Republican senators warned yesterday in a letter to the Environmental Protection Agency (EPA).

The ethanol mandate, incorporated under the Congressional Renewable Fuel Standard (RFS), requires biofuels to be blended into the U.S. fuel supply each year through 2022. The mandate, administered by the EPA, was enacted in an effort to improve the environmental impact of gasoline, as well as improve gas mileage.

Oil refiners must purchase Renewable Identification Number (RIN) credits from producers of renewable fuels to comply with federal requirements. But the cost of RINs have skyrocketed recently, leading Sens. David Vitter (R-La.) and Lisa Murkowski (R-Alaska) to ask the EPA to take decisive action to protect consumers from rising fuel prices expected to be caused by RINs.

"We ask that you utilize any and all existing regulatory authority and flexibility to address the issue of rising RIN costs and alleviate the threat of increased consumer fuel costs," the senators wrote in a letter specifically addressed to Gina McCarthy, President Obama's choice to head the EPA, reported the Associated Press.

Both senators definitely have clout. Vitter is considered the top Republican on the U.S. Senate Committee on Environment and Public Works, while Murkowski is the top Republican on the U.S. Senate Committee on Energy and Natural Resources.

"EPA, industry and market analysts have anticipated a more dynamic RIN market in 2013 due to increasing renewable fuel volume requirements established by Congress," the agency wrote in response to the letter, according to the AP.

The EPA added it will "monitor the markets to assess the program's impacts" and issue a more detailed response to the senators' request shortly.

The agency proposed that refiners and blenders use 16.6 billion gallons of biofuels in motor fuels this year.

Even without ethanol mandates, U.S. gasoline prices often spike in the summer months as demand rises during the peak driving season.