Ethanol Blog

There was no correlation between an increase in the cost of Renewable Identification Numbers and retail gasoline prices in 2013, according to a study by Informa Economics, Inc.

The results of the study, conducted by Informa for the ethanol trade group Renewable Fuels Association, were released at a news conference Tuesday afternoon by Bob Dinneen, president and CEO of the RFA. Explaining the research was Scott Richman, senior vice president of Informa, a private analytical firm.

RINs are the credits used to show compliance with the Renewable Fuel Standard submitted by obligated parties -- refiners, blenders and importers -- to the Environmental Protection Agency, the RFS administrator. A RIN is created when a qualified renewable is produced or imported, and moves through the supply chain. A RIN can be separated from the renewable fuel and traded in the market, with the mandate allowing an obligated party a maximum 20% carryover of unused RINs into the following year.

2013 D6 Renewable Fuel RINs, satisfied primarily with corn-based ethanol, peaked in price at $1.46 on July 18. Average retail gasoline, however, peaked at $3.784 on Feb. 28, according to Energy Information Administration data.

"RIN prices did not add any significant explanatory power [to the retail price of gasoline]," Richman said. "As a result, it cannot be concluded that changes in RIN prices cause changes in retail gasoline prices."

Gasoline prices increased because of the price of crude oil, and the majority of gasoline prices are explained by crude oil prices, the Informa study concluded.

Another cause is the number of vehicle miles driven, pushing up the price of retail gasoline. Those factors accounted for 95% of the cost of gasoline, the study said.

Informa concluded that RINs have a 0.2% impact on the price of gasoline.

The study will be sent to the EPA as part of the RFA comments on the 2014 RFA renewable fuel mandate, Dinneen said, to back up the RFA's argument that RIN prices do not cause spikes in gasoline prices.

The EPA's proposed 2014 volume mandate includes a reduction in the overall mandate to 15.21 billion gallons from volumes set by statute at 18.15 billion.

The proposed mandates are scheduled to be finalized by the end of the first quarter, EPA has said, and the federal agency is currently accepting comments on the proposal.

EPA said the proposal seeks to put the RFS program "on a steady path forward -- ensuring the continued long-term growth of the renewable fuel industry -- while seeking input on different approaches to address the E10 blend wall."

Nearly all gasoline sold in the U.S. is now E10, which is fuel with up to 10% ethanol.

The EPA proposal cuts the nested RFS category primarily satisfied with corn-based ethanol to roughly 13 billion gallons, down from 14.4 billion gallons set by statute, in an effort to avoid the ethanol blend wall -- the saturation point for ethanol in the gasoline pool based on current gasoline standards and consumer preference.

Dinneen said on Tuesday that the purpose of the RFS was to go beyond 10% of the gasoline pool. "It's all about the signal that is sent," he said.

He said limiting ethanol to 10% of the gasoline pool is stagnant and sends a wrong signal for investment in second generation biofuels.

"It's all about the future -- a growing marketplace," Dinneen said. "It was never intended to be constrained to what's convenient for ExxonMobil."

However, the American Petroleum Institute, an oil and gas industry trade association, early Tuesday attacked the RFS exceeding the blend wall as costly to consumers.

"The blend wall forces refiners and importers of gasoline and diesel fuel to remain in compliance by limiting the volume of transportation fuels that can be supplied to the domestic market," API stated.

Myke Feinman can be reached at myke.feinman@telventdtn.com

(ES)

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