Evidence Shows Waivers Reducing Ethanol Demand

Cindy Zimmerman

Evidence is mounting that the Environmental Protection Agency’s granting of numerous “small refiner exemptions” from blending obligations under the Renewable Fuel Standard is indeed working to destroy demand for both ethanol and corn.

Renewable Fuels Association (RFA) Executive Vice President Geoff Cooper lays out the evidence in a column on the E-Blog detailing the reduction in ethanol blending over recent months and a sharp drop in the price for Renewable Identification Numbers (RINs).

“The small refiner exemptions, the PES settlement, and EPA’s failure to enforce the statutory 2016 RFS requirement (as ordered by the courts) have effectively reduced the 2016 and 2017 RFS volumes each by 1 billion gallons or more. The result has been a glut of unneeded RIN credits and sharply lower RIN prices,” says Cooper.

RIN prices were around 90 cents in late November 2017 when the ethanol blend rate hit a record high. But secret small refiner waivers, the bankruptcy bailout, White House discussions of a RIN price cap, and other actions have torpedoed the RIN market, leaving prices at a three-year low near 30 cents.

Cooper says RINs are now cheap enough that refiners would opt to comply by purchasing RINs rather than taking steps to expand ethanol blending, which has already been reflected in recent lower blend rates. In addition, lower RIN prices mean the retail discount for blends like E15 and E85 is shrinking, potentially decreasing consumer demand and reducing retail station throughput of higher blends.

This is why RINs matter. And this is exactly why recent EPA actions to artificially inflate RIN stocks and sink RIN prices are already affecting the ethanol market and destructing demand.

Read the whole column.

Ethanol, Ethanol News, RFA, RFS, RINS