Skyrocketing RIN Prices Signal Ethanol Blend Wall Imminent
(Platts) Prices of renewable fuel credits, needed by refiners to comply with the nation’s Renewable Fuel Standard, have skyrocketed over the past few months, an indication to some that the dreaded “blend wall” is close.
The price for the traded Renewable Identification Numbers (RINs) for corn-based ethanol have jumped from a trading range of about 2-3 cents/RIN to as much as 79 cents/RIN.
…Ethanol sources said the sharp increase in ethanol RIN prices to start 2013 were the result of a perceived lack of RINs because of the impending “blend wall.”
“I think the real issue is that you have obligated parties looking forward to 2014, where even with a carryover, it is unlikely that there will be enough D6 RINs available to meet the anticipated 14.4 billion gallon requirement at an E10 blend ratio,” said David Dunn, CFA, an analyst at Florida-based brokerage Progressive Fuels Limited.
“D6″ is the label for the corn-based ethanol category that the EPA assigns. Other RINs are issued for biodiesel, cellulosic ethanol and other advanced biofuels.
… When the volumetric blending levels were set for the RFS in 2007, lawmakers, as well as industry representatives, didn’t expect the level of ethanol produced to exceed 10% of the national gasoline supply until much later this decade. But steadily declining gasoline demand coupled with increased fuel efficiency mean that benchmark, called the “blend wall,” will hit this year and, for some refiners, may have already been reached. READ MORE