WASHINGTON, March 27 (Reuters) - The Trump administration ordered U.S. refiners on Friday to increase the amount of biofuels they blend into gasoline and diesel this year and next, a move the industry said would only raise pump prices already spiking due to the war in Iran.

The rebuke from the U.S. refining industry revealed a rare public rift between President Donald Trump's White House and oil companies which have traditionally backed his efforts to bolster the fossil fuel energy sector.

"It's baffling, with fuel prices already rising due to the conflict in Iran, that EPA is finalizing a rule that will make things far worse for consumers," said Chet Thompson, president and CEO of the American Fuel & Petrochemical Manufacturers.

"This is not what energy dominance looks like."

MOVE WELCOMED BY FARMERS

Under the U.S. Renewable Fuel Standard, oil refiners are required to blend billions of gallons of corn-based ethanol and other biofuels into the nation's fuel pool each year, or buy tradable credits called RINs from those that do.

A RIN typically corresponds to one gallon blended. Farmers and biofuel producers support the program as vital to American farm country, but refiners view it as a costly burden.

The Environmental Protection Agency on Friday said it set total 2026 biofuel obligations at 26.81 billion RINs and 2027 obligations at 27.02 billion RINs. The new obligations include 70% of around 2 billion gallons that had been waived in 2023-2025 under a program that allows exemptions for small refiners.

The figures are much higher than initially proposed. The EPA in June 2025 had proposed total biofuel blending obligations at 24.02 billion RINs in 2026 and 24.46 billion RINs in 2027, without taking a position at the time on what percentage of previously waived obligations should be reallocated.

The National Corn Growers Association welcomed Friday's announcement, along with a decision by the administration earlier this week to expand the seasonal availability of gasoline with 15% ethanol, saying it would help farmers.

"Today's announcement, coupled with the Trump administration's E15 summertime waiver earlier this week, is a positive move for the nation's corn growers who are navigating an exceptionally difficult economic environment," the group said in a statement.

The Renewable Fuels Association, which represents ethanol producers, said however that it had wanted 100% of waived volumes to be reallocated, rather than 70%.

AFPM's Thompson said he believed U.S. biofuels mandates had already increased consumer pump prices by 25 cents a gallon, and that the new mandates would further raise them.

A gallon of regular gasoline in the U.S. now costs about $3.98 on average, up more than a dollar since the start of the war on Iran on February 28. Diesel prices have risen even faster.

The spike in energy prices is a political vulnerability for Trump and his Republican party leading into November midterm elections.

The requirement to blend biofuels into the nation's fuel pool was adopted around two decades ago as a measure to reduce U.S. dependence on imported fuel and to help farmers.

The EPA added on Friday that, starting in 2028, foreign fuels and feedstocks will receive only half of the RINs of American-made products, a measure it said would help the domestic biofuel industry.