Regulation of Fuels and Fuel Additives: Renewable Fuel Standard ...

which may change in response to an incremental change in the level of oil imports or
consumption. 99
Since the 1997 publication of this report changes in oil market conditions, both
current and projected, suggest that the magnitude of the “oil premium” may have
changed. Significant factors that should be reconsidered include: oil prices, current and
anticipated levels of OPEC production, US import levels, potential OPEC behavior and
responses, and disruption likelihoods. ORNL will apply the most recently available
careful quantitative assessment of disruption likelihoods, from the Stanford Energy
Modeling Forum’s 2005 workshop series, as well as other assessments 100 . ORNL will
also revisit the issue of the macroeconomic consequences of oil market disruptions and
sustained higher oil prices. Using the “oil premium” calculation methodology which
combines short-run and long-run costs and benefits, and accounting for uncertainty in the
key driving factors, ORNL will provide an updated range of estimates of the marginal
energy security implications of displacing oil consumption with renewable fuels. The
results of this work effort are not available for this proposal but will be part of the
assessment of impacts of the RFS in the final rule. Although not directly applicable,
financial economics literature has examined risk diversification. The agency is interested
in ways to examine changes in risks associated with diversifying energy sources in
general and solicits comments as such.
We also calculate the decreased expenditures on petroleum imports and compare
this with the U.S. trade position measured as U.S. net exports of all goods and services
economy-wide. All reductions in petroleum imports are expected to be from finished
petroleum products rather than crude oil. The reduced expenditures in petroleum product
imports were calculated by multiplying the reductions in gasoline and diesel imports by
their corresponding price. According to the EIA, the price of imported finished products
is the market price minus domestic local transportation from refineries and minus
taxes. 101 An estimate was made by using the AEO 2006 gasoline and distillate price
forecasts and subtracting the average federal and state taxes based on historical data. 102
We compare these avoided petroleum import expenditures against the projected
value of total U.S. net exports of all goods and services economy-wide. Net exports is a
measure of the difference between the value of exports of goods and services by the U.S.
and the value of U.S. imports of goods and services from the rest of the world. For
99 For instance, the 1997 ORNL study gave a range for the “oil premium” $0 to $13 per barrel (adjusted to
$2004) based on 1994 market conditions. The actual value depended on assumptions about the market
power of foreign exporters and the monopsony power of the U.S., the risk of future oil price shocks and the
employment of hedging strategies, and the connections between oil shocks and GNP.
100 Stanford Energy Modeling Forum, Phillip C. Beccue and Hillard G. Huntington, 2005. “An Assessment
of Oil Market Disruption Risks,” FINAL REPORT, EMF SR 8, October 3.
(http://www.stanford.edu/group/EMF/publications/search.htm)
101 EIA (September 1997), “Petroleum 1996: Issues and Trends”, Office of Oil and Gas, DOE/EIA-0615, p.
71. (http://tonto.eia.doe.gov/FTPROOT/petroleum/061596.pdf)
102 The average taxes per gallon of gasoline and diesel have stayed relatively constant. For 2000-2006,
gasoline taxes were $0.44/gallon ($2004) while for 2002-2006, diesel taxes were $0.49/gallon. The average
was taken from available EIA data (http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp)
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