WASHINGTON, March 27 (Reuters) - The recent surge in prices for the U.S. ethanol credits known as RINs is due to speculation, the top-ranking Republican on the Senate Judiciary Committee said on Wednesday.
Iowa Senator Chuck Grassley said he had "just one word - speculation," when reporters asked about the price explosion and congressional information-gathering on the subject.
RIN prices surged during the winter, zooming from a penny a gallon in December to more than $1 in March. Credits changed hands late last week at round 70 cents. U.S. law requires that biofuels like ethanol be blended with motor fuels. The cost of ethanol therefore plays a role in the final price of gasoline.
"That's quite a rise (in prices). It doesn't seem to me that's the marketplace," said Grassley, whose home state is the top producer of corn and ethanol.
Grassley suggested derivatives market regulators, such as the Commodity Futures Trading Commission, should look into the issue.
RIN is the abbreviation of Renewable Identification Number, a numeric code that the law requires producers or importers of renewable fuels to generate. RINs can be used by petroleum refiners to prove compliance with the federal law to mix ethanol into gasoline.
The oil industry says the ethanol mandate and a decline in gasoline demand is the cause of the surge. They say it will be impossible to meet ethanol targets at current gasoline consumption rates, so RINs become vital. Ethanol makers say the amount of fuel involved is too small to affect fuel prices.
Last week, the chairman of the Senate Energy Committee asked the U.S. Environmental Protection Agency for more information about RIN prices, including the names of the largest non-physical holders of the credits, including traders, brokers and hedge funds.