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The impact of the Renewable Fuel Standard on US oil refineries

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  • Burkhardt, Jesse

Abstract

This paper uses a confidential refinery-level dataset to estimate how unexpected changes in the costs of the Renewable Fuel Standard (RFS) affected US oil refinery prices and production decisions for regulated and non-regulated products between 2012 and 2014. The RFS mandates blending of biofuels with conventional gasoline and diesel. Each gallon of biofuel blended with conventional fuel generates a renewable fuel credit (RIN). Refineries comply with the RFS by purchasing RINs from blenders and retiring them with the EPA. I find that RIN costs were fully passed through to wholesale gasoline and diesel prices on average, consistent with previous literature and a necessary condition to ensure the effectiveness of the RFS. Furthermore, I estimate full pass-through in all regions of the US, with the exception of the Eastern Seaboard. I also find that RIN cost increases are associated with higher jet fuel production, a non-regulated product, and with decreased jet fuel prices. Finally, I corroborate previous findings by showing that refinery specific input cost shocks are not fully passed-through to wholesale output prices. These results, combined with other estimates in the literature, suggest that on average the RFS is functioning efficiently and that the wholesale petroleum market is highly competitive.

Suggested Citation

  • Burkhardt, Jesse, 2019. "The impact of the Renewable Fuel Standard on US oil refineries," Energy Policy, Elsevier, vol. 130(C), pages 429-437.
    • Handle: RePEc:eee:enepol:v:130:y:2019:i:c:p:429-437
    DOI: 10.1016/j.enpol.2019.03.058
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    3. Jing Shen & Yang Zhang & Benhai Guo & Suli Zheng, 2020. "Coupling Relationship Analysis between Quality Infrastructure and Ecological Environment Quality for Policy Implications," IJERPH, MDPI, vol. 17(20), pages 1-16, October.
    4. Sweeney, Richard L., 2023. "Environmental Regulation, Imperfect Competition, and Market Spillovers: The Impact of the 1990 Clean Air Act Amendments on the US Oil Refining Industry," RFF Working Paper Series 23-19, Resources for the Future.
    5. Karel Janda & Eva Michalikova & Luiz Célio Souza Rocha & Paulo Rotella Junior & Barbora Schererova & David Zilberman, 2022. "Review of the Impact of Biofuels on U.S. Retail Gasoline Prices," Energies, MDPI, vol. 16(1), pages 1-21, December.
    6. García, Antonio & Monsalve-Serrano, Javier & Martínez-Boggio, Santiago & Rückert Roso, Vinícius & Duarte Souza Alvarenga Santos, Nathália, 2020. "Potential of bio-ethanol in different advanced combustion modes for hybrid passenger vehicles," Renewable Energy, Elsevier, vol. 150(C), pages 58-77.
    7. Xinming Du, 2023. "Symptom or Culprit? Social Media, Air Pollution, and Violence," CESifo Working Paper Series 10296, CESifo.

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