A coalition of seven agricultural and biofuels organizations sent a letter this week to two members of Congress who have introduced legislation to modify the Renewable Fuels Standard (RFS2), warning that it is unnecessary and could lead to higher prices at the pump.
The organizations were reacting to a bill introduced by Representatives Bob Goodlatte (R-VA) and Jim Costa (D-CA) that would reduce or eliminate the volumes of renewable fuel use required by the Renewable Fuels Standard (RFS) based upon corn stocks-to-use ratios.
The groups point to a recent analysis by economists at the University of Wisconsin and Iowa State University that found growth in ethanol production reduced gasoline prices by an average of $0.25 per gallon, or 16 percent, over the entire decade of 2000-2010. “In 2010, for example, the authors found that the use of ethanol reduced wholesale gasoline prices by an average of $0.89 per gallon,” the letter stated, adding that the result of an immediate reduction in ethanol output “would be a dramatic increase in U.S. gasoline prices and the resulting increase in U.S. gasoline imports would also cause world gasoline prices to increase in the short run.”
Speaking to concerns over high corn prices, the groups wrote, “Numerous studies have concluded that the RFS is a minor contributor to corn prices. The most recent study, a July 2011 analysis commissioned by the International Centre for Trade and Sustainable Development, found that corn prices would have been exactly the same in 2009/10 if both the RFS and Volumetric Ethanol Excise Tax Credit (VEETC) had not existed.”
The groups are the American Coalition for Ethanol (ACE), the American Farm Bureau Federation (AFBF), Growth Energy, the National Corn Growers Association (NCGA), the National Farmers Union (NFU), the National Sorghum Producers, and the Renewable Fuels Association (RFA).
More analysis on the issue can be found on the RFA E-xchange Blog.