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RINferno

Submitted by on August 17, 2016 – 10:26 amNo Comment

by Jim Lane (Biofuels Digest)  Let me see if we got this right. Donald Trump loves the Renewable Fuel Standard  —   Carl Icahn loves Donald Trump   —   Therefore, Carl Icahn hates the Renewable Fuel Standard

With that, welcome to the 2016 United States Presidential election season. And welcome to something that used to be called RINsanity and now we had better call RINferno.

You see, prices for low-carbon fuel credits in the United States, under the Renewable Fuel Standard, have been spiking this year. Prompting a firestorm that has spilled over into the election season but is raging even more furiously amongst friends and foes of the RFS.

And at the very center of Hell, various actors in the high-carb fuels supply chain are engaged in a titanic battle between the forces of darkness and the forces of slightly less darkness, over who gets the bill.

Today, we’ll look at the battle amongst the supply chain. Tomorrow, we’ll look at how the RINferno is affecting the development of advanced biofuels.

Icahn’s portfolio companies chose to be a buyer of credits instead of investing in low-carbon fuel production and distribution capacity. Which, of course, was the point of and the economic signal given by a Republican-controlled Congress and White House when it established the RFS ten years ago.

Icahn’s strategy? Isolate the refiners that are being hit with costs, add up the costs as a group, neglect to mention that the problem is management and strategy, paint the refiners as a victim, and issue a series of quotes to friendly reporters blaming the Environmental Protection Agency for excessive regulatory zeal that is sending America down the drain.

Is there really a shortage? As BIO spokesman Paul Winters described it, “the RIN shortages he predicts have not occurred – at least in aggregate. His problem is that he didn’t have the foresight to secure a supply of RINs.

(T)he big winners are some very large integrated oil companies who can distribute far more low-carbon fuels than they are obligated to. So, they can buy fuels, detach the overstock in RINs, and sell them to smaller refiners.

The smaller refiners say they are paying as much as $1.8 billion in RFS compliance, which means that on the other side of the trade the counter-parties are making $1.8 billion. As we noted, the trade in RINs nets zero to the US government or renewable fuel producers.

You see, the fix that Icahn is proposing is not to end the RFS altogether, and return the US to a petroleum and gas monopoly. This group wants to shift the point of obligation from themselves to, well, someone else.

Holly Frontier is pricing E85 at $1.07 and Valero at $0.97. Yet, The Andersons-Denison is pricing E85 at $0.55 per gallon. (Slight difference in the ethanol content, 70% vs 83%, but it’s all qualifying E85). It’s the same molecules. And the discount to wholesale “clear regular gasoline” is as much as 66%.  READ MORE and MORE (Today) and MORE / MORE (Reuters) and MORE (Argus Media) and MORE (Forbes) and MORE (Seeking Alpha) and MORE (Platts) and MORE (Bloomberg/CVR Energy) and MORE (The Hill)

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