Why Can’t Wendy’s and BP Get Along?
As Congress considers scaling back or even abolishing U.S. government regulations mandating the use of renewable fuels, many in the petroleum industry are on cloud nine. That is, everyone except for British Petroleum (NYSE:BP).
The reason BP isn’t happy is because their joint venture with Dupont Co. (NYSE:DD), set to start producing a new alternative fuel by the end of the year, would have its market evaporated before they could enter it should Congress repeal the Renewable Fuels Standard, the law in question.
“They don’t need to change the law,” Paul Beckwith, the chief executive of the venture, Butamax Advanced Biofuels, of Wilmington, Delaware, said in an interview. The program “as it’s currently configured is working, and there are good opportunities for increasing renewable levels beyond where they are today.”
The RFS started in 2007 amid concerns of foreign oil dependence, according to Bloomberg. Congress set quotas for the use of alternative fuels, like ethanol and biodiesel. Under the law, refiners like Exxon Mobil (NYSE:XOM) must blend a certain amount of renewable fuels into their gasoline.
The Environmental Protection Agency say the mandate helps production of American made fuels. They also assert that it helps corn farmers by increasing demand, and cuts emissions.
Critics say that the use of corn to make ethanol pushes up cost of food. The National Council of Chain Restaurants, whose members include Wendy’s (NYSE:WEN) and White Castle, is angry because their commodity costs are spiking because of the increased demand for corn. After hiring an outside research firm to conduct a study, “It was very clear that the RFS was a cause of it,” said Robert Green, the executive director of the Washington-based group.
Lobbyists from Exxon and Tesoro (NYSE:TSO) have a different complaint. They say that falling U.S. fuel demand means that requirements for ethanol could force its use in gas higher than the 10 percent allowed under government regulations.
The next two weeks will prove crucial for the RFS, as lobbyists from both sides take turns catching Washington’s ear. Whichever side is more persuasive could save billions for their customers.