Posts from George Hoekstra

Thursday, 11/17/2022

While we’ve seen up-and-down spikes in stock market indices, cryptocurrency values and the prices of crude oil and motor fuel in recent years, the price of one important commodity has been quietly but relentlessly rocketing higher — octane, the primary yardstick of gasoline quality and price. The steady rise in octane prices is tied in part to the fundamental change in how octane is valued, with the retail market now being impacted more by demand than production costs. In today’s RBN blog, we look at why octane prices have climbed over the past decade and what market factors are limiting its supply.

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, 09/15/2022

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, 07/28/2022

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, 06/16/2022

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, 06/07/2022

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.