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Irwin, Good Analyze Ethanol, Biodiesel RINs Relationships

Submitted by on September 28, 2015 – 2:01 pmNo Comment

by Susanne Retka Schill (Ethanol Producer Magazine)  Ethanol D6 RIN prices have stayed relatively stable over the summer while D4 biodiesel RINs prices plummeted, Illinois economists Scott Irwin and Darrel Good point out in a recent FarmDocDaily post, “Why Isn’t the Price of Ethanol RINs Plummeting?

Understanding why changes in RINs pricing occur is important, the economists write, “since RINs prices represent the marginal cost of complying with RFS mandates.”  In an ongoing analysis of RINs markets, they economists point out the relationship between D4 biodiesel and D6 ethanol RINs have been following unusual patterns since the U.S. EPA issued its proposal for the 2014, 2015 and 2016 RFS mandates in late May. “The ratio of D6 to D4 prices dropped from about 0.90 before the EPA announcement to near 0.45 at the bottom, recovered all the way back to 0.90 in early September, and then has fallen back to around 0.70 in recent days.”

They describe the economic models they have built to help conceptualize and analyze drivers affecting RINs prices. The authors say “the key to understanding the large fluctuations in the relative price of D6 and D4 RINs is market expectations about how soon the stock of RINs will be exhausted.”

To read the full analysis and view the supporting charts and tables, click here.   READ MORE

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