How RINs Really Work, and Why Big Oil Hates Them
by Ron Lamberty (Ethanol Producer Magazine/American Coalition for Ethanol) The ability for independent fuel marketers to sell renewable fuels at lower prices while improving profit margins by selling RINs, has given independent fuel marketers something they have never had before: an advantage over Big Oil.
…(A) RIN is a 38-digit number that serves as a “proof of purchase seal” for oil companies to submit to the U.S. EPA as proof they’ve complied with terms of the RFS (Renewable Fuel Standard).
… RINs can only increase the price of fuel that does not contain ethanol, because ethanol blends come complete with their own RIN attached—no extra charge.
In the real world, over the past 15 months, higher RIN prices helped independent gas station and convenience store owners sell more renewable fuel than they’ve ever sold, well above Big Oil’s imaginary 10 percent blend wall—at pump prices well below lower-octane nonblended fuels. Marketers who have sold E85 for years priced more aggressively, knowing that the RINs they would receive would more than make up for lower pump prices. More new E85 fueling locations were added last year than in any of the past five years. Increased RIN prices helped expand the availability of renewable fuels as station owners did the math and realized that an investment in equipment to sell more renewable fuels would have a quick payback.
If Joe’s Corner Convenience Store and Exxon/Mobil each get 8,000 gallons of E10, they each get 800 RINs. Exxon/Mobil has to turn theirs in to EPA. Joe doesn’t refine products that harm the environment, so he can sell his RINs. So far this year, Joe’s RINs would be worth about 400 bucks. That means he could sell his E10 for 5 cents less than the oil company or pass 3 cents along to customers and make 2 cents more profit. Or he could put $400 toward a pump upgrade to sell E15 or E85 or any other blend to get him more RINs. Either way, until Exxon/Mobil sells more renewables than the RFS requires, it can’t compete with Joe.
And that’s why Big Oil hates RINs. READ MORE