Expert Disputes Renewable Fuels Industry Claim That Ethanol, Biodiesel Lead to Lower Prices for Consumers
OTTAWA, ONTARIO–(Marketwire – June 13, 2011) – A Canadian petroleum pricing expert disputes claims made by the Canadian renewable fuels industry that gasoline consumers would be paying dramatically higher amounts at the pumps if it were not for the ethanol mandate that came into force last year and that the same would hold true for diesel fuel consumers if the federal government proceeds with a proposed biodiesel mandate on July 1st.
In a recent analysis for the Canadian Trucking Alliance (CTA), Michael J. Ervin, Vice President and Director of Consulting Services with Kent Marketing Services Limited, who has a reputation for insightful, impartial and clear analysis of petroleum industry issues stated:
“In fact, it is entirely likely that a more robust ethanol renewable fuel standard (ten per cent for example) might lead to higher gasoline prices, particularly if existing incentives and tax exemptions were removed, since ethanol is a relatively expensive gasoline additive. The same may very well hold true for biodiesel, once better price/cost transparency is established for this product.”
The federal government’s own Regulatory Impact Analysis Statement on the proposed biodiesel mandate concluded that biodiesel will be more expensive than regular diesel (albeit by differentials that are lower than what empirical evidence from the US suggests is actually the case) and fuel economy will be lower. It also concluded that the net cost to taxpayers from the mandate will total $2.5 billion over the next 25 years.
CTA, a federation of the provincial trucking associations in Canada, which represents over 4,500 trucking companies, has been critical of the proposed biodiesel mandate, saying it provides no consumer protection from higher fuel costs or damage to engines and offers virtually no environmental benefit.
CTA is urging federal environment minister, Peter Kent, to re-think the mandate and is calling upon industry minister, Christian Paradis to ensure that the impact of renewable content on the price for gasoline and diesel fuel forms part of the work of a Parliamentary Committee that will be reviewing pricing methods.
David Bradley, president and CEO of the trucking alliance says “it is important that gasoline and diesel fuel consumers be heard as well as the oil companies.”
“Among our concerns,” he says, “is the impact that additives such as ethanol and biodiesel have on the price of fuel and what the impact of the removal of subsidies to the renewable fuel sector will be. We believe the renewable fuels sector is using frozen facts.”