RFA: Big Oil Blocks Ethanol

Report Shows Influence Exerted on Gas Stations

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
Connect with Todd:
An RFA study says the oil industry is blocking higher ethanol blends at retail outlets. (DTN file photo)

OMAHA (DTN) -- More than a year after the Renewable Fuels Association asked the federal government to investigate the oil industry's alleged blocking of renewable fuels from the market, the RFA released a report Tuesday that claims the oil industry is making a concerted effort nationwide to not allow higher ethanol blends at the pump.

RFA claims the oil industry uses a number of methods to prevent the market expansion of E15 and E85.

"Oil companies continually point out that they don't physically own many retail gas stations today; thus, they argue, big oil has 'no control' over what fuel products are offered to the consumer by the retailer," the report said. "However, a deeper analysis clearly reveals that it is the oil companies themselves that are blocking the sale of greater volumes of renewable fuels by retail gas stations. Through rigid franchise and branding agreements, restrictive supply contracts, outlandish labeling requirements, punitive penalties, and other heavy-handed tactics, big oil prevents and discourages retail stations from selling fuels with higher renewable content, like E15 and E85.

"This analysis shows that oil companies have in fact exerted substantial influence over what fuel products retail stations offer to consumers, especially those stations that carry the brand name and logo of major oil conglomerates and refining companies."

Carlton Carroll, spokesperson for the American Petroleum Institute, told DTN Tuesday the industry would not respond to the allegations.

"I'm not responding to the report," he said. "But I'll note that even where E85 is offered, consumers just aren't buying it. This report isn't worth responding to. The alarmist language belongs in a Hollywood movie, not in a public policy debate on what is best for consumers."

The oil industry has made the case that the proper infrastructure isn't in place, and with overall gasoline demand down, the industry would be unable to meet the mandated biofuels volumes in the Renewable Fuel Standard.

In March 2013 the RFA sent a letter to the heads of USDA, the U.S. Department of Energy, Federal Trade Commission and EPA, asking for an investigation following allegations made by a Lawrence, Kan., fuel station that its supplier was pressuring the retailer not to sell E15.

The station, Zarco 66, decided to sell E15 after selling E85 for years. One of the big five oil companies -- Shell, BP, Chevron, ExxonMobil and ConocoPhillips -- that supplied the station "threatened to terminate Zarco 66's franchise agreement and charge Zarco 66 hundreds of thousands of dollars in penalties unless Zarco 66 started offering premium gasoline, gasoline that would replace the ethanol housed" in one of the station's fueling tanks, according to the RFA letter.

Bob Dinneen, RFA president and chief executive officer, said during a conference call with reporters Tuesday that RFA received a brief response back from the FTC.

"They said, 'We'll look into it,'" he said. "A year later they've done nothing and that's frustrating."

P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]

KEY FINDINGS

The study found unbranded or independent stations are about four to six times more likely to offer E85 and 40 times more likely to offer E15 than stations carrying oil brands from one of the big five companies.

Out of nearly 48,000 retail gas stations carrying brands of one of the five largest oil companies, fewer than 300 offer E85 or E15. Of the some 34,300 retail gas stations that display other oil refiner brands, fewer than 475 sell E85 or E15.

"And just two brands -- Cenex (CHS) and Speedway/SuperAmerica (Marathon) account for more than half of the refiner-branded stations offering these fuels," RFA said in the report. "Of the remaining 74,000 independently branded stations, between 1,700 and 2,600 stations sell E85 or E15."

The RFA also released its first-ever consumer choice report card that provides grades on how retail gas stations work to sell renewable fuels. Most oil-branded retail gas station chains receive an F grade because less than 1% of their branded stations offer E15 or E85. Among oil company-affiliated brands, just Speedway/SuperAmerica (Marathon) and Cenex (CHS) received high marks of A and B, respectively.

Several independent/unbranded chains -- including Meijer, Thorntons, Kum and Go, Break Time, and Kwik Trip -- received grades of A-plus, meaning more than 25% of their stations offer E15 or E85.

CONTRACTS BLOCK ETHANOL BLENDS

In addition, the report released a number of findings including:

-Contracts often require multiple grades of branded gasoline to be sold at all times, "which typically eliminates the retailer's ability to store E85 or E15."

-Many franchise and branding agreements require retailers to post "intimidating warning labels" on E85 and E15 dispensers.

-Some agreements require "costly and unnecessary equipment" to be installed before a retailer can sell E85 or E15.

-Some contracts require E85 dispensers to be isolated from other dispensers.

-Branding agreements discourage or prohibit retailers from promoting or advertising the availability of E85.

-Contracts include substantial penalties for violating the terms.

ETHANOL RECOMMENDATIONS

The report makes a number of recommendations for opening what the ethanol industry says is a closed market.

The report suggests the federal government should open an investigation into what the ethanol industry says are "anti-competitive practices," and enforce the Renewable Fuel Standard, the Petroleum Marketing Practices Act and Gasohol Competition Act.

The RFA report makes a number of recommendations. That includes expanding investments in ethanol infrastructure, an expansion of consumer education about the economic and environmental benefits of biofuels, and continued incentives for the production of flexible-fuel vehicles.

View the full RFA report here, http://tinyurl.com/….

Todd Neeley can be reached at todd.neeley@dtn.com

Follow Todd on Twitter @toddneeleyDTN

(CC/CZ)

P[] D[728x170] M[320x75] OOP[F] ADUNIT[] T[]
P[L2] D[728x90] M[320x50] OOP[F] ADUNIT[] T[]
P[R1] D[300x250] M[300x250] OOP[F] ADUNIT[] T[]
P[R2] D[300x250] M[320x50] OOP[F] ADUNIT[] T[]
DIM[1x3] LBL[article-box] SEL[] IDX[] TMPL[standalone] T[]
P[R3] D[300x250] M[0x0] OOP[F] ADUNIT[] T[]

Todd Neeley

Todd Neeley
Connect with Todd: