Differing RINs estimates creates confusion, market spikes

By Susanne Retka Schill | April 16, 2013

Confusion remains over how to interpret and compare various estimates of renewable identification number (RIN) availability, said Nick Paulson, assistant professor in the Department of Agricultural and Consumer Economics at the University of Illinois. In the department’s ongoing analysis in FarmDocDaily, Paulson posted, “An Update on the 2012 RIN Carryover Controversy.” 

“The [RIN] market has been a hot topic over the past few months as prices for renewable ethanol (D6) RINs soared from 5 cents to over $1 per gallon in early March,” he writes. RINs are assigned to gallons of ethanol by producers, following shipments until the fuel is blended into gasoline. If the blender is an obligated party under the renewable fuel standard (RFS), the RINs are used to show the U.S. EPA that the blender has met its renewable volume obligation. The blender can also separate and sell the RINs to other obligated parties. Prices have shot up in recent months as concerns mount among obligated parties that there will be a shortage of RINs as the blend wall is reached. EPA rules, however, do allow a RINs holder to carryover 20 percent of its RINs into the next year.

In his article, Paulson describes a recent D6 RIN price jump that was attributed to a report dropping the estimated 2.6 billion in available RINs, to 2.1 billion. Both numbers were correct, but one was reporting all RINs while the other reported just one category.    “This week's continued RIN market controversy emphasizes its complexity as well as the critical need for a better understanding of the various categories of RINs,” he writes. “As estimates of RIN availability are released from various sources, confusion remains over how to interpret and compare these estimates and their ultimate impact on RIN values and trading. Given the nested structure of the RFS mandates and the ways in which RINs generated from the various biofuel categories can be used for mandate compliance, exactly what is included in a given RIN stock estimate should be carefully considered.”

To read Paulson’s explanation of the various D-codes, available RINs and implications in the market, click here.