The federal Renewable Identification Number (RIN) and California’s Low Carbon Fuel Standard (LCFS) have long served as tools to force renewable fuels like ethanol into the U.S. fuel supply. They are environmental credits that subsidize production of renewable fuels that would not otherwise be economically justified. Nuances embedded in the design of these credit systems have again kicked in to surprise the markets, this time with a hit to renewable diesel (RD) margins. Today’s RBN blog zeroes in on two root causes for that hit.
RINS
Thursday, 5/09/2024
How can a business survive and thrive while spending $5.30 to make a product that sells for $1.90? That’s what’s happening in the booming renewable diesel (RD) market, where government subsidies allow RD to compete directly with petroleum diesel even though RD is inherently more costly to produce. But as new plants keep coming on stream, RD profit margins are coming under closer scrutiny. In today’s RBN blog, we analyze RD profit margins and show how they are changing as the market continues to expand.
Thursday, 7/06/2023
The Renewable Identification Number (RIN) has long served as the tool used to force renewable fuels like ethanol and soybean oil into the U.S. gasoline and diesel supply. A creation of the Renewable Fuel Standard (RFS), RINs act as a subsidy that enables the production of renewable fuels that would not otherwise be economically justified. RIN prices are set by the usual workings of supply and demand, but chatter has bubbled up recently in the renewable fuels ecosystem that prices for a particular variety of RIN could be headed for a crash. In today’s RBN blog, we explain what’s behind the talk about RIN prices.
Wednesday, 11/09/2022
The dramatic increase in the price of the D6 Renewable Identification Number a decade ago was one of the more spectacular moves in the history of major commodity trading. The spike in the price of RINs — the credits used to certify compliance with the federal Renewable Fuel Standard (RFS) — was brought on by a sudden uptick in demand and stakeholders who lacked sufficiently deep awareness and understanding of the complex RIN credit system. In today’s RBN blog, we use the story of 2013’s “Big Bang” in D6 RIN prices to explain the fundamental mechanism that determines RIN prices, consider whether such a price shock could occur again, and discuss what stakeholders can do to prepare.
Thursday, 10/20/2022
Renewable Identification Numbers (RINs) are credits used to certify compliance with the Renewable Fuel Standard (RFS), which requires certain minimum volumes of biofuels to be blended into fuels sold in the U.S. There are many types of fuels covered by the RFS and so RIN credits come in different categories. One category, the D6 RIN, applies to the blending of corn-based ethanol into refined gasoline to make the gasoline-ethanol blends we pump into our cars, SUVs and pickups. In 2013, the D6 RIN price skyrocketed 100-fold in one of the most extreme cases of panic buying in any major commodity market in history. In today’s RBN blog, we examine that event and address three key questions: How did it happen, what was the solution, and why does it matter today?
Thursday, 9/15/2022
What has been the most controversial topic in the U.S. refining industry over the last 10 years? Well, it’s a matter of opinion but, judging from time spent in earnings conference calls, law offices, courtrooms, congressional committees, the White House, and other forums of business and political debate, Renewable Identification Numbers — or RINs — would have to be a top contender for that prize. In today’s RBN blog and the final episode of this series, we consider two differing viewpoints on the effects of the RIN system and specific disagreements — or are they misunderstandings? — about the financial consequences of RINs that have dominated the debates and legal cases.
Thursday, 7/28/2022
Refiners and the U.S. Environmental Protection Agency (EPA) have locked horns in a dispute over Renewable Identification Numbers (RINs). Now in its 10th year, the dispute stems from contradictory premises about how RINs affect the profits of the refiners and blenders who produce the ground transportation fuels sold in the U.S. To form an opinion of what ought to happen next, you need to understand the fundamentals of how RINs work in light of the RIN being a tax and a subsidy that forces renewables into fuels. In today’s RBN blog, we focus on how RINs force renewables into fuels and address the related question: Do RINs increase the price consumers pay for gasoline?
Thursday, 6/16/2022
For several years now, no single topic has caused more angst in refiners’ quarterly earnings calls than the seemingly arcane topic of renewable identification numbers, or RINs, which can have a big impact on a refiner’s financial performance. RINs are a feature of the federal Renewable Fuel Standard (RFS), which requires renewable fuels like ethanol and bio-based diesel to be blended into fuels sold in the U.S. And depending on your point of view — farmer, refiner, blender, consumer, politician — you may have a very different perspective regarding RINs’ role as a tax and a subsidy. In today’s RBN blog, we dig into the fundamental aspects of RINs at the root of this long-running controversy and examine the role of RINs as a mechanism for forcing renewables into fuels.
Tuesday, 6/07/2022
Last month, in the U.S. Environmental Protection Agency’s (EPA) latest ruling in a long-running dispute with refiners over the Renewable Fuel Standard (RFS), EPA denied 36 petitions from refiners seeking exemptions to their obligation to blend renewables like ethanol into gasoline for the 2018 compliance year. At the core of this dispute are two contradictory premises about Renewable Identification Numbers, or RINs. One premise says the RINs system adds cost that hurts refiners’ profitability, while the other says refiners’ profitability is not affected. Can two seemingly contradictory premises be true? In today’s RBN blog, we begin an examination of the issues surrounding RINs and the degree to which the cost affects refiners’ and blenders’ bottom lines.
Thursday, 11/17/2016
Over the past few weeks, publicly traded independent refining companies reported their latest quarterly results, and nearly all lamented on a common theme: the cost of Renewable Identification Numbers (RINs) is out of control. However, the financial burden is not felt equally across the industry, as companies with integrated marketing operations (refining, blending and retailing) don’t face the same RINs-cost albatross as merchant refiners who don’t have retail operations. Today we review the escalating RIN costs that obligated parties have endured this year and explain how the degree of financial pain depends on the level of refiners’ downstream integration.
Sunday, 8/07/2016
Renewable Identification Numbers (RINs) have grabbed the attention of refiners this spring and summer, and for good reason. The price of RINs –– ethanol credits used by refineries to prove compliance with the federal Renewable Fuel Standard –– have soared, and the credits are having an outsized negative effect on some refiners’ costs and profitability. Part of the RIN price spike can be attributed to concerns that there may not be enough to go around this year, and that the situation in 2017 may be far worse. But the rocketing cost of the credits is also raising questions about whether the largely unregulated and opaque RINs market is being manipulated or even cornered by those hoping for a quick, Powerball-size profit. Today, we continue our review of the RINs market with a look at which types of refiners are hit hardest by high RIN prices, and at whether we might be heading off a RIN-availability cliff.
Monday, 7/25/2016
The rising cost of Renewable Identification Numbers (RINs) –– ethanol credits used by refineries to prove compliance with the federal Renewable Fuel Standard –– is putting added financial pressure on the refining sector, which already is squeezed by too-high inventories and thin crack spreads. In fact, for some refiners RIN expenditures may soon be their biggest single operating cost category. (Yes, you read that right.) The cost of ethanol credits is being driven up to record levels by several factors, chief among them the concern there may not be enough to go around this year and next. And things may only get worse from there. In today’s blog, we begin a two-part examination of the 2016-17 market for RINs, a regulatory must-do that rankles and vexes most refiners and gasoline importers.
Monday, 2/23/2015
Arnold Schwarzenegger said “Hasta la vista, baby” to the governor’s office in Sacramento four years ago, but his 2007 executive order establishing a low-carbon standard for transportation fuels is only now starting to have a real effect on California refineries. Some refiners say the rule aimed at reducing “life-cycle” greenhouse gas emissions from the transportation fuel sector 10% by 2020 is unrealistic and could result in refinery closings and gasoline and diesel shortages. Others say California’s goal is achievable. Today, we consider the Golden State’s low-carbon fuel standard (LCFS) and what it may mean for refiners.
Wednesday, 3/20/2013
When we described the quirky workings of the US renewable fuels mandates back in July and August of 2012 the topic was merely brain food for commodity market theorists and sleep deprived gasoline analysts. This month the market for big brother sounding “Renewable Identification Numbers” (RINS) - credited to refiners when they add ethanol to gasoline blends - is suddenly the hottest thing since sliced bread. The price of 2013 RINS shot from a few cnts/gal in January 2013 to an astronomical $1/gal on March 8, 2013. Earlier this week they were trading in the stratosphere, at about $0.70/gal. Today we look at what lies behind the current RIN furor.
Thursday, 8/09/2012
A couple of weeks back in “A Market of Contradictions: Ethanol Mandates, Motor Gasoline and the Blend Wall” we looked at how US refiners are on the hook to blend more and more ethanol into a diminishing pool of gasoline (the blend wall) under Renewable Fuel Standard (RFS) legislation. Ethanol producers are losing 35 cnts/gal after the hottest July ever fried the corn harvest. Sinking ethanol production may not cover refiner’s needs. In response, refiners are turning to an arcane workaround called Renewable Identification Numbers (RINS). Today we'll peel back the red tape to see what is really going on.