Biofuel and Oil Seek Federal Help to Deal with Sharp Decline In Production and Prices

While biofuels and oil producers play tug-of-war, experts say that the whole energy sector is suffering.

Both the oil and ethanol sectors are asking the federal government to step in as each one sees a sharp decline in prices and production. Oil groups say that the pandemic pushed the industry over the edge, while it was battling an already downward demand trend. According to Frank Macchiarola with American Petroleum Institute, “The conditions created by COVID-19 present substantial business and operational challenges for the oil and gas industry, including an unprecedented market imbalance, significant commodity price declines, and heightened efforts to maintain continuous operational integrity in the face of the pandemic.”

He says that the steep decline in fuel usage directly contributes to industry prices. To help alleviate over-saturation of the market, the industry tried to control the supply. “U.S. producers had responded significantly to market signals by lowering production by two million barrels per day... While the supply response was helpful, it pales in comparison to the historic drop in demand,” Macchiarola says.

The strain led to another oil sector request for ethanol waivers, a continued fight for the biofuels industry. The EPA has yet to decided on retroactive refinery waiver request. Iowa Senator Chuck Grassley says that the petitions are an attempt to work around a 10th Circuit Court decision. That would put an end to the large number of blending waivers granted by the administration.

“If the EPA ends up accepting these petitions, not only will they lose again in court, they will also risk President Trump’s support in Iowa and other Midwestern states. This pattern of RFS abuse must end. Administrator Wheeler should publicly dismiss these ridiculous petitions as soon as possible,” according to Sen. Grassley.