API chief economist says oil majors support, not oppose, renewable fuels

In Iowa, the chief economist for the American Petroleum Institute said that major oil companies support more ethanol use, see no problems in implementing 15 billion gallons of ethanol by 2015, but have questions about the blending of 36 billion gallons by 2022.

“We were opposed to the original mandates and subsidies, that is true,” John Felmy told the Des Moines Rotary Club. “Right now, we’re just trying to understand what the various proposals would mean. We’re not completely united as an industry.” Felmy added that the oil majors have not blocked renewable energy but rather are making major investments in alternative energy R&D, with a focus on advanced biofuels where an oil company’s technological capabilities can add more value.

American Petroleum Institute and oil industry background

In South Dakota, VeraSun Energy named Duane Gilliam as chairman on the company, succeeding Gordon Ommen. Gilliam was a formed executive vice president of Marathon Ashland and a director of the American Petroleum Institute.

In New York, Vinod Khosla and Big Oil started a “food fight” at the Wall Street Journal’s ECO:nomics conference, where Khosla accused the American Petroleum Institute for linking food price increases to ethanol production, saying “The API started issuing press releases about food. Suddenly they got interested in the welfare of poor Africans.”

Business Week ran a stinging article last year on the efforts of oil companies to slow the spread of E85. The article pointed out that, as fuel blinders, it is the oil industry that receives the 51 cent per gallon tax credit for ethanol, but the industry – which did not request the subsidy – has been funding anti-biofuel studies, stimulating a food vs. fuel debate by suggesting that biofuels are driving up the price of food, and not launching E85 through their own brands, forcing eE85 to be distributed through independents.

The Business Week article said that the opposition from biofuels advocates was expected, but that Big Oil has earned the enmity of US automakers, who are pushing E85 for among other reasons, the potential of E85 to relieve them of a $100 billion investment in reaching tough CAFE emission standards. The article quoted Mark N. Cooper, research director at the Consumer Federation of America, in saying that Big Oil has “reacted aggressively against the expansion of ethanol production, suggesting that it perceives the growth of biofuels as an independent, competitive threat to its market power in refining and gasoline marketing.”

The food vs. fuel debate picked up in June on the heels of a report released by the American Petroleum Institute that concluded that consumers would pay “$12 billion-plus a year more for food as corn prices rise to meet ethanol demand.”

Global Insights, which authored the report for API, said that the fact that API paid Global Insights to prepare the anti-ethanol report did not influence Global Insights’ decision to reach anti-ethanol conclusions.

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