The Oil Industry's Fight to Kill Renewable Fuels—and Why It May Win

The American oil industry could be on the verge of winning its war on the federal Renewable Fuel Standard (RFS), as the Obama administration weighs changes that could severely undermine the nation's most successful—and most divisive—effort to cut crude oil consumption in the nation's cars.

Faced with what it called an "inadequate domestic supply of renewable fuels," federal regulators in November proposed lowering the 2014 usage requirements for the total volume of renewable fuel and for advanced biofuels. Last month, regulators said they may also grant oil industry requests for waivers on their biofuel obligations for 2014 as well as for fiscal 2013, which ends in June.

The moves triggered howls from biofuels companies and representatives from corn states fearful that those setbacks will lead to others, and that uncertainty over the program will pull the rug from under the fledgling market for advanced biofuels. The Environmental Protection Agency is expected to rule on the proposed biofuel reductions and the oil industry waivers in the coming months.

Of course, the potential unraveling of the RFS is complicated and highly controversial. The program's troubles stem primarily from sinking gasoline demand, overly optimistic biofuels targets and 2012's drought-driven rise in corn prices. In addition, the ongoing dependence on corn-derived ethanol has further inflamed critics who say the rush to produce that kind of ethanol has been gobbling up land and diverting food to U.S. gas tanks.

But, for all its struggles and faults, the RFS accomplished things that almost no other gasoline additive or alternative was in a position to achieve so quickly.

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