Should the Trump administration support a Wall Street-sized political boondoggle over the interest of Main Street?
The answer, of course, is no. But that will certainly be the result if the White House consents to the will of a powerful U.S. senator who is ardent about turning corn – America’s most subsidized crop – into fuel. Senator Chuck Grassley, an Iowa Republican, is working to obstruct a reform measure aimed at leveling the playing field so cash-strapped, blue-collar refiners in Middle America can compete in the market place.
President Trump, along with top EPA officials Scott Pruitt and Andrew Wheeler, understands how the Renewable Fuel Standard (RFS) is in dire need of change and is open to a “win, win” reform measure that lifts regulatory restrictions on small refiners while still maintaining environmental protections.
Presently, the law forces refiners to obtain government-issued Renewable Identification Number (RINs) credits by either blending ethanol into their gasoline or purchasing other refiners’ extra credits. However, instead of achieving the intended outcome of reducing pollution, this mandate has transferred wealth from small, independent refineries to an elite clique of already-wealthy Americans. It’s a reverse “Robin Hood” effect, where the government takes wealth from companies on Main Street and gives it to corporatists on Wall Street.
Very few refineries blend fuel; that is typically the job of Big Oil companies like BP and Shell. When the ethanol mandate was passed in 2007, most refiners couldn’t just snap their fingers and figure it out. As is the case with any other private business, there are significant costs associated with jumping into a new line of work. And so, most must purchase RINs credits – a fact that no one enjoys more than speculators.
The Big Oil firms sell their credits to banks and other investment houses, which drive prices to unrealistic heights. JPMorgan Chase, for example, is said to possess hundreds of millions of RINs. One industry executive stated that one of the company’s traders even advised the bank to purchase every credit available on the marketplace.
Some investment houses go a step further in taking advantage of this government ethanol mandate by creating RINs all by themselves. Morgan Stanley does this through TransMontaigne, its oil company that blends fuel and gives its generated credits to the Morgan Stanley Capital Group.
“Chaotic” is the only way to describe the current system. Because of speculators’ marketplace interventions, the price of RINs often fluctuates to the detriment of small, independent refiners. RINs started at less than 10 cents earlier in the program and reached a high of $1.43 after Wall Street got involved. Essential refineries like Philadelphia Energy Solutions are filing for bankruptcy due to RINs now costing more than twice their payroll.
Enter President Donald Trump, the self-described champion of the forgotten men and women, who took note of the issue and recently signed off on a solution to prevent the JP Morgans/Morgan Stanleys of the world from making a bad government policy even less palatable.
On May 8, Reuters reported that the president wants to allow U.S. companies that export American biofuels to receive RINs, a move that would, through the law of supply and demand, lower the price of these credits and thus make Wall Street far less interested in wreaking havoc on the marketplace. This reform will not only preserve thousands of U.S. jobs, but by removing penalization to U.S. exports, it is also expected to createover 20,000 new jobs, mostly in the agricultural sector.
Unfortunately, the president’s plan may be short-lived. There is a small but vocal minority that is clamoring for the White House to retain the status quo. The opposition’s leader is Sen. Grassley, who says attaching RINs to exports would “fall far short of the promises made to Midwestern farmers and to the ethanol industry.” The White House appears to be listening, as it recently delayed its announcement of the planned changes.
What voters like about President Trump is that he does what’s right, not what’s easy. He doesn’t allow attacks from special interests and the mainstream media to get in the way of his penchant for crossing achievements off the list of promises he made to the American people.
His go-getter attitude and results-based administration have been sorely needed for quite some time, and he shouldn’t shut it down now at this critical time for the forgotten men and women that he vowed to protect on the campaign trail.
The president already knows that he cannot let a government mandate bankrupt thousands of small, private businesses and spur unemployment for the breadwinners of thousands of middle class families. Now he just needs to take a breath and push his reform proposal to the finish line. We are counting on him to get the job done.
Jerry Rogers is the founder of Capitol Allies, an independent, nonpartisan effort that promotes free enterprise. He’s the co-host of The LangerCast on the RELM Network. Twitter: @CapitolAllies.
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