Ethanol Blending Pressures Already Shrinking Refiner Margins
by Laura Blewitt (Bloomberg) Federally mandated ethanol blending is adding extra pressure to the faltering profits of U.S. refiners.
The worst crude oil downturn in a generation, which at first helped refiners’ profits, has now passed through to the fuel prices. Now, gasoline is cheaper than the ethanol that refiners have no choice but to use.
… Chicago ethanol now runs at about a 2-cent premium to gasoline, while Los Angeles prices are 24 cents higher, David Hackett, president of energy consultancy Stillwater Associates said by phone.
If a company doesn’t blend enough ethanol to meet its quota, it can fill the obligation by purchasing blending credits called RINs.
Concerns of a 2017 RIN shortage are mounting. A report released last month by Andy Lipow, president of Lipow Oil Associates, predicted the price of RIN credits could surge in a “sequel” to the 10-fold price run up seen in 2013. Lipow pointed to actual gasoline demand that’s come out stronger than forecast. READ MORE and MORE (Platts)