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US to investigate claims of oil industry blocking consumer ethanol use

08.22.2013  | 

The FTC said it was looking into assertions that oil companies are using their influence over retail gas stations to block consumers from accessing gasoline blended with extra ethanol.



WASHINGTON -- The Federal Trade Commission said it was looking into assertions by some members of Congress that oil companies are using their influence over retail gas stations to block consumers from accessing gasoline blended with extra ethanol.

The inquiry underscores the deepening divide between the renewable fuels industry, which wants to promote E15 gasoline containing 15% ethanol, and the oil industry, which says consumers don't want E15. Oil producers and refiners are pressing Congress to repeal the United States law that requires refiners to use ever greater amounts of corn ethanol and renewable fuels.

A pair of lawmakers, Sen. Amy Klobuchar (Minnesota) and Sen. Chuck Grassley (Iowa), called for the FTC inquiry, saying they had reports of instances where oil companies pressed independent gas stations to sell premium gasoline in addition to regular gasoline. Since most stations own only two storage tanks, such a demand would make it impossible for gas stations to offer higher ethanol blends without installing a new tank, said the senators, both of whom hail from states where ethanol is produced.

"Given the implication these alleged activities could have on competition in the marketplace, we urge you to  investigate them and consider whether any action is necessary, they said in an Aug. 2 letter to the FTC that" described the oil companies' alleged actions as a possible antitrust violation.

The FTC said in a response that it would look into the issue. The letter didn't suggest the FTC was opening a formal investigation.

The Justice Department hasn't yet responded to the lawmakers' request, according to Mr. Grassley's staff.

The American Petroleum Institute, which represents oil producers, and the American Fuel & Petrochemical Manufacturers, which represents refiners, said they were reviewing the senators' letter and didn't have immediate comment on it.

A 2007 renewable fuels law forces refiners to blend a certain number of gallons of renewable fuel into gasoline each year. The 2013 standard requires the use of nearly 17 billion gallons of renewable fuel, most of which is corn ethanol.

The oil industry and other critics have questioned the wisdom of the law in recent months as overall gasoline consumption fails to keep pace with lawmakers' expectations. Refiners say the law forces them to use more renewable fuel than is physically possible given that most gasoline contains only 10% ethanol, a problem known as the blend wall.

The Environmental Protection Agency has approved the use of 15% blends for newer cars, but E15 hasn't become popular with consumers. According to the Renewable Fuels Association, roughly 30 stations in eight states offer the 15% blend.

Renewable fuels companies say oil companies are trying to block the use of E15. The Renewable Fuels Association, a lobbying group for the industry, says it knows of at least one Kansas station owner who was allegedly pressured by an oil company to stop offering E15.

Dow Jones Newswires

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I agree with Geoffrey and Bill.

Prakash Lakhapate

First option should be to use renewable energy sources such as Solar, Wind etc.
If it is not feasible then use CH4 as fuel.
If CH4 is not available then use gasoline , diesel etc by using Ethanol.
For reducing pollution use of Ethanol is necessary

Norm Ferguson

Most of the energy companies are also in the ethanol business, having read the writing on the wall many years ago that methanol was the next best thing to sliced bread. Unfortunately ethanol absorbs water and if you live in a coastal area or are in marine service ethanol causes other issues. Not the magic elixir many thought.

Geoffrey Mbaku

It takes one and a half gallon of gasoline to produce on gallon of ethanol. Ethanol comes from corn. So many of the consumer goods we use comes from corn. When it is mandated that E15 or at least 15% of gasoline we use be made up of ethanol, the price of corn goes up and so do the price of the so many items that are made from corn. Whenever you read an article such as the one below, know some one from the corn producing states or corn industry is behind it. The US now has plenty of crude oil and natural gas. At this time we do not need the help of corn as part of our abundant energy solutions. Geoffrey Mbaku.


Why doesn't the article state the whole story about E15? The absence of the following facts makes the both article partisan and misleading regardless of the writer's intent.

Automakers have declared E15 unsuitable for use in nearly all new (2014) and older cars. E15 has been determined by engine manufacturers to cause severe engine (cylinder head) damage.
As use of E15 violates a car's warranty, car manufacturers have publicaly stated they will not cover or repair the damage.
If a gasoline producer's pure gasoline is blended into E15, does any intelligent individual believe that the resulting class action lawsuit will focus upon the local, independent gasoline retailer or the refining industry?
The EPA ruling is purely a political move that steadfastly refuises to accept the professional engineering claims of the automobile manufacturers. Look at the two corn-bribed politicians demanding this truly 'phony' investigation.
Given the certainty of damages to the public caused by E15, what refiner would choose to risk suffering a costly lawsuit caused by a 3rd party using its gasoline to blend a damaging fuel?
I would consider a manufacturer's efforts to prevent consumer complaints / damages and avoid lawsuits a laudable effort and a 'best practice'. Do PAC-funded politicians exhibit the same behavior?
If you agree, please vioce your support of the refining industry by contacting your congressmen and demanding that they 'defend the consumer' against the self-interests of the corn & ethanol lobbiests and the politicized EPA.

Personal Disclosure: I do not work for any refiner or oil producer. I do own mutual funds in my 401k that may be invested in them. Most importantly, my family drives gasoline powered automobiles and uses gasoline powered lawn mowers that would be severely damaged should they be run on E15.

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