November 7

The RFS Explained: How the ethanol mandate contributes to higher home heating oil costs – and how Congress can fix it

Home heating oil prices are making headlines again.

As temperatures fall, an estimated four to five million households in the U.S. are bracing for higher home heating bills, especially in the Northeast region. Thousands of consumers in states like Maine, New Hampshire, Vermont, and Connecticut should expect to pay 8 percent more for home heating oil this year – an estimated average of $1,850 per home, according to the Energy Information Administration (EIA).

“The Northeast has relatively little refinery capacity and therefore relatively little production of distillate fuel oil, including heating oil, the EIA explains. Limited refinery capacity means that any temporary refinery closures – even routine maintenance – could result in reduced East Coast fuel supplies and increased prices.

Inventories are already well below average due to reduced refinery supply and increased consumption. America’s refiners have been working to restore national heating oil inventories, which fell to dangerous lows last year. But heating oil inventories are still hovering near historically low levels. Stockpiles are even more scarce in New England, the region with the highest concentration of U.S. heating oil customers.

The RFS Explained: How the ethanol mandate contributes to higher home heating oil costs – and how Congress can fix it

The federal ethanol mandate – the Renewable Fuel Standard – has contributed to reduced refining capacity and higher distillate fuel prices.

  • The RFS, our nation’s ethanol mandate, requires independent refiners to purchase compliance credits, RINs, if they are unable to blend ethanol on site.
  • High RFS compliance costs have contributed to several refinery closures since 2019, resulting in the loss of at least 1.4 barrels a day in national refining capacity.
  • Remaining independent refiners have reported spending more on RFS compliance costs than all operational costs combined.

It’s estimated that volatile RIN prices add 20 to 30 cents to the cost of producing every gallon of fuel, including home heating oil – a hidden tax paid by American refiners and consumers.

Now, higher home heating oil costs undermine efforts to fight inflation and improve U.S. energy security. “Spending on heating oil threatens to prop up inflation in the Northeast, home to four million of the five million U.S. homes that burn the fuel. That reliance exposes the region to volatile global diesel markets,” Wall Street Journal reporter David Uberti reports. “Meanwhile, a combination of aging buildings, reduced refining capacity and limited natural-gas pipelines offers few prospects for relief.”

Fortunately, there are bipartisan efforts afoot in Congress aimed at restoring U.S. refining capacity, which would provide longer-term relief. By containing RFS compliance costs and capping RIN prices, the Safeguarding Domestic Energy Production and Independence Act would help to stabilize our nation’s distillate fuel inventories—and home heating oil prices.