The refinery Philadelphia Energy Solutions, which is responsible for a quarter of the capacity on the East Coast, was declared bankrupt and will be reorganized. The city is a huge refinery and anyone who used to be Philadelphia Airport will recognize this. But for refinery, this is a kid. Americans like to think for this little guy.
Expected not to be interrupted, business will continue under different names. Bankruptcy is not expected to interrupt the supply of refined oil on the East Coast. But the relevance of this bankruptcy lies in its perception of the misleading and harmful ethanol licensing policy that began during the Bush administration.
This policy requires refineries to mix a certain percentage of ethanol with gasoline. If the refiner can not mix enough ethanol with gasoline, they must buy a credit called RIN. The credit formula is very complicated and is calculated annually by the EPA. If the refinery does not buy the right credit, then it must pay the U.S. government a fine.
But here’s a detonator – not mentioned in many news articles about the story – refineries can not logically mix ethanol with gasoline during refining. Mixtures of gasoline and ethanol can degrade over time, so the refinery mixes the two to make gasoline have a short shelf life (about 3 months).
As a result, ethanol is blended into the customer’s hands before the point of sale. In this way, once the gasoline into the hands of consumers, gasoline began to demotion, rather than refineries.
Many refineries have or legally connect to gas stations. For example, ExxonMobil owns refineries and gas stations. Saudi Aramco, which owns Motiva, the largest refinery in the United States, also owns a Shell gas station in the southeastern United States. Such refineries can ship unmixed gasoline to their own gas stations, which consumers buy when gasoline mixes with ethanol.
However, Philadelphia Energy Solutions Inc. is an independent refiner, does not own a gas station, and does not legally associate with a large gas station operations. As a result, the Philadelphia refinery said it already faces debt that it wants to buy ethanol credits or fines the U.S. government. According to press reports, other similar refineries have been successful, and industry sources said the Philadelphia energy solution has plagued management’s bad decisions. However, the U.S. government played a role in regulating the most important bankrupt refinery in the United States.