Marathon Petroleum CEO Calls for 'Workable' Renewable Fuel Standard
FINDLAY, Ohio -- The Renewable Fuel Standard (RFS), passed by Congress in 2007, must be adjusted so that it doesn’t affect Speedway LLC and parent company Marathon Petroleum Corp.'s (MPC) bottom line, MPC President and CEO Gary Heminger stressed today during the company's second-quarter earnings call.
"We are asking Congress for a workable RFS," he said this morning. The RFS requires refiners to use 13.8 billion gallons of ethanol this year and 15 billion by 2015. Ethanol is typically combined with gasoline in a formula of up to 10 percent.
NACS, the Association for Convenience & Fuel Retailing, and the Society of Independent Gasoline Marketers Association of America (SIGMA) testified last week that adjustments to the RFS must be made because the United States is on the verge of hitting the blend wall, when the RFS' annual volume obligations exceed the volume of renewable fuel the market can reasonably absorb. This could drive an increase in gasoline and diesel prices, causing severe economic harm to the country, the trade groups stated.
Compliance with the RFS and narrower crude oil price differentials were the main reasons cited by MPC for the lower year-over-year earnings the company reported today. Companywide, Findlay, Ohio-based Marathon Petroleum earned $593 million in its fiscal second quarter, compared to $814 million in its 2012 second quarter.
On the bright side, earnings in its Speedway retail division continued to hum along. Improved fuel and merchandise margins led the convenience store retailer to achieve a profit of $123 million in its 2013 fiscal second quarter, compared to a profit of $107 million in the same period last year.
Heminger expressed how pleased he was with Speedway's earnings, especially considering that the parent company's overall year-over-year profit declined. "Our Speedway [segment] had [an excellent] quarter financially," he said.
Leading Speedway's earnings were a 1-cent increase per gallon in fuel margins, as well as a $9-million improvement in merchandise gross margins compared to the year-ago quarter.
Looking ahead, Heminger expects gasoline demand to be flat for the second half of 2013, but he forecasts a 3.2-percent hike in diesel demand at its Speedway stores.
Speedway operated 1,468 convenience stores and gas stations as of June 30 vs. 1,455 on the same date one year earlier.