Source: NASDAQ
NEW YORK — (Dow Jones) — Valero Energy Corp. (VLO) supports increasing ethanol blending in gasoline but is cautious about making such a move without clearing liability issues, the company's top official said Tuesday.
The U.S.'s largest independent oil refinery also became one of its largest corn ethanol producers over the past year as it snapped up 10 biofuel plants with the capacity to produce 1.1 billion gallons of ethanol a year. The move not only allows Valero to fulfill a portion of its biofuel blending requirements but also aligned it with some of the oil refining industry's biggest critics: corn ethanol producers and lobbyists.
Valero has moved into the corn ethanol industry amid ongoing food-versus-fuel debates. Bill Klesse, Valero's chairman and chief executive, said in a conference call Tuesday that "the U.S. farmer has demonstrated an ability to grow more corn, increasing yields, and so we think that ethanol is viable in the fuel mix." He added that there's still an opportunity to grow the ethanol business.
In order to grow the refiner's small but profitable business, the blend wall will have to be increased beyond the 10% limit since most of the gasoline sold in the U.S. is already at or near that threshold. U.S. regulations require that about 12 billion gallons of ethanol be blended in 2010 and that volume will be capped at 15 billion gallons in 2015.
But the corn ethanol industry has been worried that it won't be able to blend that much ethanol because gasoline demand has remained low after falling sharply during the U.S. recession. This summer, the U.S. Environmental Protection Agency is widely expected to lift the blend wall to 15% in response to a waiver requested by corn ethanol producers.
