The so-called ethanol mandate guarantees the biofuel a share of the gasoline market. Because of this, the Wall Street Journal says, “some of the world’s biggest oil companies” will see a windfall of more than $1 billion from the sale of renewable fuel credits associated with the mandate.
“For other companies, especially smaller refiners, the rules have had the opposite effect, forcing them to spend hundreds of millions to buy credits to comply” with the requirements, said the Journal. The estimate of $1 billion from sales by Chevron, Shell and BP of the biofuel credits came from an analysis commissioned by a company that operates petroleum refineries and is owned by an ethanol critic.
Some of the oil companies said they made large investments in the biofuel program so sales revenue is not the same as a profit. The ethanol mandate requires petroleum distributors to blend ethanol into gasoline or to buy a corresponding amount of credits. The Journal reported Valero Energy has said it may have to spend as much as $850 million this year on the biofuel credits. The price of credits has soared along with complaints that the EPA set the target for ethanol use at a higher volume than will actually be used. The ethanol industry says the oil industry could switch to a higher blend rate.