By Carey Gillam
March 12 U.S. ethanol blending credits, known as
RINs, took a volatile ride on Tuesday, losing nearly half their
value in early trading but later staging a swift partial
The 2013 "vintage" ethanol RINs were trading around 90-92
cents per gallon Tuesday afternoon after trading in the mid-60s
to 70-cent range earlier, trading sources said. On Monday, the
blending credits for 2013 were trading between $1.05 and $1.13,
well up from the mid-20 cents at the end of January.
"There were good reasons why it got bid up, and some of
those reasons are still very operative," said Spencer Kelly, who
tracks market activity for the Oil Price Information Service.
"They won't get real cheap."
The strength of the ethanol RINs is tied to both fears of
general ethanol supply shortages and also a looming "blend wall"
for alternative fuel that is expected to make it difficult for
refiners and other obligated parties to meet federal renewable
fuel standards heading into 2014.
RIN, which stands for Renewable Identification Number, is a
38-character numeric code that producers or importers of
renewable fuels are required to generate for each gallon and it
acts as a credit an obligated party can claim toward its
The 2005 Renewable Fuels Standard set in place escalating
levels of alternative fuels that were required to be
incorporated into the U.S. fuel stream. And until this year, the
amount of ethanol mandated to be mixed into the U.S. fuel stream
was achievable, but a decline in gasoline demand and other
factors has made meeting mandates more challenging.
Oil industry players blame the mandates for higher gas
prices and say the rising RIN values are curtailing flows of
gasoline imports from Europe. CVR Energy Inc CEO Jack
Lipinski on Tuesday said the "unintended consequences" of the
mandate were "frightening."
The ethanol industry said Tuesday that it is the oil
industry that is directly to blame for rising RIN values and
rising gas prices.
The Renewable Fuels Association issued a statement that said
if the oil industry would blend at the higher 15 percent rate
allowed by the EPA, gasoline prices would be cheaper as would
values for the RIN credits. The RFA said the oil companies have
been the key players bidding up the price of RINs over the last
"They are doing so voluntarily to avoid the alternative of
adding more ethanol to gasoline," the RFA said. "Oil companies
can either buy a gallon of renewable fuel to comply with the RFS
or buy a RIN credit on the open market."
The Environmental Protection Agency allows the higher blend
for many passenger cars and light trucks. But many refiners and
other opponents say the higher blend can cause engine damage in
Many groups argue that the EPA should reduce the RFS
mandates altogether. The EPA just proposed the 2013 RFS on
January 31, and it has until April 7 to finalize the mandate for
refiners and blenders to use 16.6 billion gallons of biofuels in
motor fuels this year.
Mark McMinimy, a senior policy analyst at Guggenheim
Washington Research Group, said it was unlikely that the agency
would adjust the proposal for this year as RINS and ethanol are
"Looks to me for 2013, between the ethanol production, the
RINS credits out there, and stockpiles of ethanol, which are not
tight, that there should be plenty of availability between those
three sources to meet the 2013 requirement," said McMinimy, who
calls the market fluctuations "RINsanity."
"There's always the possibility EPA could make an adjustment
for 2014, when they come out with the standard for that year,
which won't be until later this year," he said.
During the height of the drought that cut corn production
last summer the EPA upheld the mandate despite several requests
from governors in agricultural states to waive it. The EPA said
then that the threshold of severe economic damage had not been
Scott Irwin, an agricultural economist with the University
of Illinois said in the Reuters Global Ags Forum on Tuesday that
he thinks the odds of a change in legislation relating to
renewable fuel use are slim. But the EPA may be able to modify
policy related to volumes mandated.
"The EPA faces a very difficult decision," he said.