In testimony before the Joint Economic Committee on April 26th, Mr. Thomas O’Malley, chairman of PBF Energy, attempted place the Renewable Fuel Standard as the root cause of refinery closures in the Northeast. Mr. O’Malley went as far as to say, “The reason for the closure of the refineries in Pennsylvania is that they didn’t make money, and the reason they didn’t make money is that you took away their market. You delivered the market to the farm industry.”
Responding to the mischaracterization, Renewable Fuels Association President and CEO Bob Dinneen wrote to JEC Chairman Senator Bob Casey and Rep. Kevin Brady to set the record straight.
“While the testimony of Mr. Thomas O’Malley, chairman of PBF Energy, attempted to tar and feather ethanol and the Renewable Fuel Standard (RFS) as the root cause of refinery closures in the Northeast, any reasonable and honest analysis of the situation reveals that a host of economic factors completely unrelated to the RFS led to the shuttering of the refineries,” Dinneen wrote. “A fair examination of the factors affecting gas prices in the Northeast not only would have shown that ethanol and the RFS have nothing to do with the recent refinery closures, but it also would have revealed that ethanol is actually helping to reduce prices at the pump for drivers in the region.”
Dinneen noted two driving factors that have led to refinery shutterings on the East Coast:
First, most East Coast refineries cannot process the lower-cost types of crude oil that are increasing in supply in North America. As a result, oil acquisition costs for East Coast refineries are substantially higher than for refineries in other regions.
Second, due to record high crude oil prices in recent years, demand for gasoline and other finished refinery products has fallen precipitously. Consumers have responded to record high oil and gasoline prices by driving less and purchasing more fuel efficient vehicles. Lower demand for refined products has led to significant refinery overcapacity in the East Coast region.
As reported recently by CNN Money, refineries in the Northeast “…are losing money because they are old and cannot process the cheaper, heavier types of oil that are increasingly in supply from Canada’s oil sands, Saudi Arabia, Venezuela and elsewhere.”
Dinneen also pointed to the fact the companies closing the refineries did not mention ethanol or the RFS. “It is telling that the owners of the shuttered refineries themselves—Sunoco and ConocoPhillips—didn’t mention ethanol or the RFS as precipitating causes of their economic difficulties when they announced the closures,” wrote Dinneen. “Despite Mr. O’Malley’s false assertion that ethanol is ‘more expensive than the product coming from refineries,’ data from the Chicago Mercantile Exchange clearly show that ethanol is selling for $1 per gallon less than gasoline at the wholesale level today.”