Petroleum, Retailer Associations Dispute Biofuels 'Report Card'

SIGMA, PMAA, NACS, API challenge RFA's claims on consumer biofuel demand

Published in CSP Daily News

By  Greg Lindenberg, Online Editor

WASHINGTON -- Petroleum and convenience store industry associations have responded to a " report card" issued this month by ethanol advocacy group Renewable Fuels Association (RFA) that gives a "failing" grade to most major and independent oil company brands for not selling higher ethanol-gasoline blends such as E15 and E85 at retail.

The report claims that despite consumer demand for the biofuels, the petroleum industry has tried to prevent gas station and c-store retailers from selling those fuels through onerous supply contracts and franchise agreements and with "intimidating" warning labels at the pump, among other tactics.

The Society of Independent Gasoline Marketers of America (SIGMA) issued a statement saying that it, along with the National Association of Convenience Stores (NACS), has sent a letter to the White House addressing misconceptions regarding the use of E85.

"Consumer support for E85 has been minimal, limiting the fuel's position in the U.S. retail market," the group said in its email newsletter to members. "SIGMA believes U.S. fuel policy should reflect that reality."

The letter to John Podesta, counselor to President Obama, states that "some renewable fuels advocates are making the fallacious argument that if retailers were to offer more E85 for sale, consumers would purchase more E85. Fundamental economic principles and real-world retailer experience, however, dictate that this is not true--supply responds to consumer demand; consumer demand is not created by the availability of supply."

It continued, "Members of SIGMA and NACS have invested substantially in E85 infrastructure only to see it under-utilized because of poor consumer demand. Without consumer demand there is no incentive for further retailer investment in E85 infrastructure. SIGMA and NACS have offered to work with the administration to engage in a study of E85 facilities in the United States to evaluate the assertions of the renewable fuels community regarding an increased market for E85."

The Petroleum Marketers Association of America (PMAA) said in its email newsletter to members, "While PMAA member companies are considering expanded use of ethanol blended fuels, they are still concerned about marketing E15 because retailers may be unable to identify their underground infrastructure to make a reliable determination of E15 compatibility; fire codes require UL listed equipment; and very little existing infrastructure is listed for E15."

John Eichberger, vice president of government relations for NACS and Fuels Institute executive directortold CSP Daily News, "50% of convenience fuel retailers are independently branded and not beholden to a refiner's contract requirements."

He added, "In 2007, they raised this issue about E85. So we worked with Congress to amend the law to require branded retailers to have the option to sell E85 under the canopy of their brand as long as they debranded it. Since then, they've had the ability to do that. You haven't seen an increase in E85 stations after that law was put in place, which makes me think that the argument that the oil companies are preventing E85 from getting to market is not accurate."

The current level of availability of E85 and similar blends "is not a conspiracy against biofuels, it's a reflection of what the market is doing," he said. "If consumers were asking for E85, E20 and E15, the retailers would find a way to sell it. And if they were being prevented from selling it, they would be calling me on a regular basis saying, 'John, help me; I want to sell the product, and I'm not allowed to.' But my members aren't calling me about that. You don't have consumer demand, which means you don't have retailers looking to invest money in a product that may or may not be successful."

Eichberger said he agrees, however, that the 8industry needs a consumer education campaign "to explain to consumers why buying ethanol products is positive.  If you want retailers to sell higher ethanol products, convince consumers to ask for and buy the products."

And American Petroleum Institute (API) spokesperson Carlton Carroll told CSP Daily News, "Gas stations are in the business of selling fuels people want, and consumers have rejected high ethanol blends because they lower gas mileage and cost more over time. Over 95% of retail stations are independently owned, not by major refiners, and the decision to invest in E85 or E15 infrastructure falls on independent stations owners. It is difficult for independent business owners to justify costly infrastructure investments for fuels that American consumers have rejected."