policy: is RFS and CAFE going to crash into eachother?

ruh roh… Gevo might be in trouble….

and perspectives on the future of the RFS…. I cut and paste the best sections below since that article is long and some of it is not that good..

At the end, they seem to suggest the government setting prices for gasoline – I don’t see how that could fly in the US… too many people make too much money on the price swings… what do you think?

We hear a reasonably widespread amount of support for eliminating the cellulosic biofuels pool, and tossing cellulosic into the general advanced biofuels pool where, for example, drop in gasoline, sugarcane ethanol and non-biomass fuels of the sort produced by Joule Unlimited will compete.

Two titanic pieces of regulation, the RFS and CAFE standards, may run into each other and begin to create instabilities that will cause difficulties for the RFS, even after the 2012′s season of drought is just a memory.

 Based on the 93% increase in vehicle mileage contemplated by CAFE standards between now and the 2025 model year, there’s every reason to assume that baseline US fuel demand for passenger cars and light duty trucks will drop correspondingly to roughly 80 billion gallons in 2022.

 today, the US meets 45 percent of its needs through domestic production. That’s the equivalent of around 58 billion gallons of domestically-produced gasoline for the light duty-market.

There’s every reason to expect the US to be able to reach full energy independence – in terms of light duty fuel – by adding 22 billion gallons or so (on a gasoline equivalent basis) of renewable fuels into the pool.

But what does that leave for US oil refiners, in terms of producing traditional fossil gasoline for the domestic light duty market? Somewhere in the neighborhood of 45-53 billion gallons, depending on how much diesel is displaced through RFS. That’s a big drop in production: they’ll squawk, and hard, and who would blame them?

Where’s the ethanol – or other biobased fuel – going to go? The RFS targets represent as much as 30-35 percent of the pool – how is that going to be distributed into the pool? CAFE raises questions that undermine the RFS’s own architecture.

 The problem in the fuel markets is that there is no public or private utility in the center, absorbing commodity price risk coming in from the supply side. In the fuel markets, there are basically unprotected sellers and unprotected buyers meeting together in a commodity market that spikes according to titanic and unpredictable market shocks and forces.

 Here in Digestville, we very much prefer a public utility model for transportation fuels. The public utility provides a levelized price to the consumer – averaging out the price swings in the commodity markets.

In turn, the utility strikes long-term fuel price agreements with a blend of suppliers – based on a pool of attributes. Price attributes, carbon attributes and perhaps even local economic development of national fuel independence attributes.

Like the utility market, one continues to have a free market in supply, and a free market in demand. Just a buffer in the center. Owned by the public and private investors, managed as a private corporation with private sector management, and accountable for P&L. reinvesting a portion of its earnings into the development of long-term fuel alternatives and energy efficiency.

Wow!  Lots of things to think about here, and how we want to structure our future energy markets..

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