With the latest news that Chevron received a hardship refinery exemption from the Renewable Fuel Standard, the Renewable Fuels Association (RFA) has released a new analysis showing just how destructive the EPA waivers are.
RFA Chief Economist Scott Richman says the 19 small refinery exemptions granted retroactively for the 2016 compliance year, and the 29 for 2017, have impacted both components of ethanol demand: quantity and price.
The impact on quantity is reflected in the ethanol “blend rate,” the average inclusion level of ethanol in the nation’s gasoline supply. The blend rate exceeded 10% in all but three months in 2017, and it hit a record 10.8% in January 2018. However, it slumped starting in February 2018, as exempted refiners were flush with reinstated RINs, and as rumors and press reports regarding the exemptions made their way into the market. The blend rate fell to 9.8% in February, ticked down to 9.7% in March and receded further 9.5% in April. Between February and June, the blend rate exceeded 10% in only one month.
Meanwhile, ethanol prices were 8 cents/gallon lower than they otherwise would have been in February, and that the impact grew to 34 cents/gallon by June and stayed at that level throughout the summer, and Richman says the impact on the ethanol industry continues.