* U.S. gasoline prices up nearly 15 cents this week
* Valero CEO says costs of biofuel credits "out of control"
* Lawmaker wants agency to resume monitoring of refinery
By Ayesha Rascoe
WASHINGTON, July 16 A leading U.S. oil executive
urged legislators on Tuesday to relax a requirement to use
renewable fuel in gasoline, blaming an "out of control" market
in biofuel credits known as RINs for adding to fuel costs in a
recent run-up in gasoline prices.
At a Senate Energy Committee hearing, lawmakers sought
answers for why a surge in domestic crude oil production to the
highest level in over two decades had failed to bring down fuel
prices. Average U.S. gasoline rates jumped 15 cents over the
past week to $3.64 a gallon on Monday, data showed.
Oil refiner Valero Energy Corp Chief Executive Bill
Klesse said the government's renewable fuel mandate is affecting
prices in the refined fuel market, repeating a long-standing
source of aggravation for the energy industry.
Although the hearing was scheduled weeks ago, the timing was
apt: U.S. benchmark gasoline futures have surged over the
past week to more than $3 a gallon, nearing their highest since
early 2012, while RIN prices have risen more than 30 percent
this month to a record over $1.30 per credit on Tuesday.
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,
known as RINs, from renewable fuel producers to comply with the
mandate. The oil executive complained about the price of the
"The thing the government can do is to get a hold of RINs,"
Klesse said. "RINs are out of control."
Oil companies have complained about spiking RIN costs this
year, as the United States 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.
The approach of the so-called "blend wall" at 10 percent has
escalated the war of words between the refining sector and the
biofuel industry. The American Petroleum Institute, the industry
lobby group, on Monday launched a new advertising campaign to
put public pressure on Washington to relax the biofuel rules,
warning that a higher blend of ethanol could damage car engines.
While Valero also operates 10 ethanol plants, RIN prices
could raise costs for the company by $750 million or more this
year, according to Klesse.
Dan Gilligan, the head of the Petroleum Marketers
Association of America, also told lawmakers at the hearing that
the RFS could lead to fuel price chaos unless the biofuel
targets are lowered.
Some lawmakers at the hearing defended the biofuel mandate.
"I don't think it's fair to blame the Renewable Fuel
Standard," said Senator Al Franken, a Democrat. "The policy is
helping to wean us off foreign oil and that is a good thing."
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. Gasoline prices could jump an additional 15 cents due to
the rise in oil costs, EIA head Adam Sieminski told Reuters
Committee Chairman Ron Wyden questioned why gasoline prices
have remained stubbornly high even though U.S. oil output has
reached record levels.
"Unlike the immediate benefits that American consumers and
businesses have seen from low natural gas prices, at the
gasoline pump, it has been pretty much business as usual," Wyden
Several lawmakers pressed Klesse and Sieminski about recent
refinery outages that have spiked regional gas prices.
Klesse said that refiners attempt to schedule maintenance
for low demand periods, but unexpected glitches can force the
shutdown of refineries at inopportune times. Antitrust laws also
prevent companies from communicating about planned 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.
The EIA had a program several years ago that helped to
monitor and report outages that was aimed at preventing such
widespread shutdowns. The program was shut due to budget cuts.
Wyden said providing real time information on refinery
outages should be a priority for the EIA and pledged to work
with the agency to address the issue.
Restarting the refinery outage report would cost the EIA
several million dollars a year, Sieminski told lawmakers.