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One Reason To Feel Sorry For Oil Companies...Really

 
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Corn Ethanol Pump

Corn Ethanol Pump

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It's pretty difficult to feel sorry for oil companies.

Why should we? They're in control of a resource we all depend upon, one way or another, and can essentially charge whatever they like for it. As a result, they make massive profits every year. Nobody pities the rich guy.

But maybe we feel a little sorry for them in this case. Why? Because last year, reports The New York Times, companies that supply motor fuel paid $6.8 million in penalties to the EPA for not mixing a special type of biofuel - that doesn't exist - into their gasoline and diesel.

Call us crazy libertarians if you will, but it seems perhaps a little unfair to be fined for a situation you have absolutely no control over.

They'll probably be fined at the end of this year, too, if the situation continues. And maybe even the next. "It belies logic," said Charles T. Drevna, president of the National Petrochemicals and Refiners Association.

He has a point.

The biofuel, known as cellulosic biofuel, is made from wood chips or inedible parts of plants, such as corncobs. Refiners were required to blend 6.6 million gallons into gasoline and diesel in 2011 - with none available. 2012's quota stands at 8.65 million gallons.

The biofuel requirement is part of the 2007 Energy Independence and Security Act, aimed at reducing greenhouse gas emissions, reliance on oil from hostile sources like Iran, and the export of dollars to pay for it.

The same law requires that 36 billion gallons of ethanol be blended into U.S. fuel by 2022, even though congress has ended taxpayer-funded subsidies on ethanol, and banned E15 gasoline - gas blended with 15 percent ethanol.

Cellulosic biofuel has so far been difficult to produce in meaningful quantities, but important in meeting the 2022 biofuel targets. Diesel made from biomass and fuel made from biological materials is already available and in use, though it remains to be see whether oil companies are meeting their quotas for these fuels.

Cathy Milbourn, an EPA spokeswoman, says that the EPA still believed the 2011 quota was "reasonably attainable" - despite the experts' assertion to the contrary.

Companies like Poet in Iowa are working on using corn kernels to produce cellulosic biofuel. Mascoma, part-owned by General Motors, will be receiving an $80 million grant from the Energy Department to help build a plant in Kinross, Michigan, to make bio-ethanol from wood waste.

The tax on non-existent biofuel and reduction of support for ethanol are further evidence of the difficulties faced in weaning the nation off fossil fuels.

In the meantime, the oil companies are pointing to new reserves of oil and natural gas in the U.S. as evidence that there's no rush in getting cleaner, low-carbon biofuels to the market.

And they're still making billions of dollars in profit each year. So on second thoughts, maybe we shouldn't feel too sorry for them...

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Comments (9)
  1. Regarding "congress has ended taxpayer-funded subsidies on ethanol," keep in mind that we still massively subsidize corn in the U.S.
     
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  2. I'm sure the oil companies are more than happy paying this chump change fine, because it means that a technology that has the potential to become a serious challenger for their near monopoly position in automotive fuels is not fulfilling it's promise .

    Maybe if the fine were $6.8 billion they would be a little more inclined to invest in this technology themselves, but their army of lobbyists in Washington will no doubt shield them against any real pressure to make changes.
     
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  3. $6.8 million does seem rather small for these companies considering their profits.
     
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  4. Agreed, it's not a lot at all, but it's more about the principal than it is the amount.
     
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  5. The principle is that they were supposed to make these alternatives happen by now and they have not done so. As a result they will pay an increasing fine until they make it happen.

    The same system is in place for renewables in the RPS (renewable portfolio standard). If the renewables are not installed, there is an increasing fine year by year. The system is working to add more renewable electricity to the mix.
     
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  6. I see your point John, but as has already been pointed out, the fines are hardly off-putting for such vastly rich companies. The fine on its own isn't an incentive for them to put more funding into biofuel development - but I expect if the technology was eventually developed to make cellulosic biofuel a realistic proposition, I'm sure they'd use it.
     
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  7. You are being far too passive.

    "If the technology was there then I'd use it."

    Make the effing technology happen and use it in what you ship to customers.

    These are large petrochemical companies, if anyone can do it, it is them. It is not like we are asking them to fix heathcare, we are asking them to fix a petrochemical problem for which they are best people in the world to perform the task.
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  8. Now I'm not an insensitive guy but I don't feel even a little sorry for them. $6.8 mil to the oil industry is nothing, they probably spend more refilling their yachts.
     
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  9. Although I'm not for the money grab from the EPA, I don't feel sorry for them. Considering current prices, a smaller producer will earn 6.8 Mil in a little less than a day. Just a side note...Very few, if any, oil companies operate with debt. There's something to be said about that when Uncle Sam can't seem to manage to do that when Uncle Sam has 1000's of times the income of oil companies. I'm just sayin.
     
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