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

as on the exports of agricultural products like corn. See section X of the preamble for a
discussion on agricultural sector impacts.
In 2005, the United States imported almost 60 percent of the oil it consumed.
This compares to just over 35 percent oil imports in 1975. 96 Transportation accounts for
70% of the U.S. oil consumption. It is clear that oil imports have a significant impact on
the U.S. economy. Expanded production of renewable fuel is expected to contribute to
energy diversification and the development of domestic sources of energy. We consider
whether the RFS will reduce U.S. dependence on imported oil by calculating avoided
expenditures on petroleum imports. Note that we do not calculate whether this reduction
is socially beneficially, which would depend on the scarcity value of domestically
produced ethanol versus that of imported petroleum products.
To assess the impact of the RFS program on petroleum imports, the fraction of
domestic consumption derived from foreign sources was estimated using results from the
AEO 2006. In section 6.4.1 of the DRIA we describe how fuel producers change their
mix in response to a decrease in fuel demand. We do not expect the projected reductions
in petroleum consumption (0.3 to 0.57 Quads) to impact world oil prices by a measurable
amount. We base this assumption on the overall size of worldwide petroleum demand and
analysis of the AEO 2006 cases. As a consequence, domestic crude oil production for the
7.5 or 9.9 cases would not be expected to change significantly versus the RFS reference
case. Thus, petroleum reductions will come largely from reductions in net petroleum
imports. This conclusion is confirmed by comparing the AEO 2006 low macroeconomic
growth case to the AEO 2006 reference case, as discussed in the RIA 6.4.1. The AEO
2006 shows that for a reduction in petroleum demand on the order of the reductions
estimated for the RFS, net imports will account for approximately 95% of the reductions.
However, if petroleum reductions were large enough to impact world oil prices, the mix
of domestic crude oil, imports of finished products, and imports of crude oil used by fuel
producers would change. We discuss this uncertainty in more detail in section 6.4.1 of the
RIA and solicit comments to the extent by which the RFS may have a price effect and
impact the imports of crude oil and refined products.
We quantified the fraction of net petroleum imports that would be crude oil versus
finished products. Comparison of same cases in the AEO 2006 shows that finished
products initially compose all the net import reductions, followed by imported crude oil
once reductions in consumption reach beyond 1.2 Quads of petroleum product. However,
there is significant uncertainty in quantifying how refineries will change their mix of
sources with a decrease in petroleum demand, particularly at the levels estimated for the
RFS. For example, a comparison between the AEO low price case (as opposed to low
macroeconomic growth case) and the reference case would yield a 50-50 split between
product and crude imports. We believe that the actual refinery response could range
between these two points, so that finished product imports would compose between 50 to
100% of the net import reductions, with crude oil imports making up the remainder. For
the purposes of this rulemaking, we show values for the case where net import reductions
96 Davis, Stacy C.; Diegel, Susan W., Transportation Energy Data Book: 25 th Edition, Oak Ridge National
Laboratory, U.S. Department of Energy, ORNL-6974, 2006.
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