Oil exec wants U.S. biofuel mandate reviewed as gas prices rise

Tue Jul 16, 2013 12:59am EDT

* U.S. gasoline prices up nearly 15 cents this week

* Fuel retail group urges monitoring of refinery outages

By Ayesha Rascoe

WASHINGTON, July 16 (Reuters) - As U.S. gasoline prices spike for the second time this year, oil industry officials will tell Congress on Tuesday that easing a mandate for the use of renewable fuels and other measures could help stabilize gas prices.

Despite rising domestic oil production, the average U.S. regular gasoline price jumped nearly 15 cents from a week ago to $3.64 a gallon on Monday, according to the U.S. Energy Information Administration.

While Tuesday's Senate energy committee hearing probing gasoline prices has been in the works for months, the latest surge in fuel prices is likely to play a prominent role in the session, which will feature testimony from EIA administrator Adam Sieminski and from oil refiner Valero chief executive Bill Klesse.

Klesse will tell the Senate Energy and Natural Resources committee that retail gasoline prices are affected by a "complex set of factors" such as the volatile international oil market, according to a text of his prepared remarks.

He will also urge lawmakers to ensure government policies do not make it more difficult to refine fuel in the United States.

The latest spike in U.S. gasoline prices coincides with a nearly 9 percent rise in U.S. crude oil costs over the past two weeks.

While Valero, the world's largest independent oil refiner, owns 10 ethanol plants, Klesse said the government's renewable fuel mandate is affecting prices in the refined fuel market.

The Renewable Fuel Standard (RFS), which calls for increasing amounts of biofuels to be blended into U.S. gasoline and diesel supplies, requires refiners to buy biofuel credits, or RINs, from renewable fuel producers to comply with the mandate.

Oil companies have complained about spiking RIN costs this year, as the nation nears a point where the law will require use of more ethanol than can physically be blended into the fuel supply at 10 percent per gallon. A broker said RIN prices hit a record of $1.29 on Monday.

"This has led to higher prices and substantial uncertainty in the gasoline market," Klesse said in his prepared testimony. "The RFS needs to be completely redone."

Touching on the controversial issue of energy exports, Klesse called for a balanced approach to allowing U.S. natural gas exports, warning that "unfettered exports" could lead to increased operating costs for refiners because natural gas powers refineries. But he said that restrictive export policies for gasoline could harm refiners.

Dan Gilligan, the head of the Petroleum Marketers Association of America, was set to tell the committee that regional gasoline prices have also been affected by simultaneous refinery outages.

Earlier this year, gasoline prices jumped to $4.29 a gallon in the Midwest after planned and unplanned refinery outages lowered gasoline output in the region.

PMAA, which represents gasoline suppliers and retailers, said the government should restart an EIA program that helped to monitor and report planned outages to the industry to help prevent such widespread outages. The program was shut down due to lack of funding.