Ethanol Blog

Valero: Gasoline Prices to Spike 10 Cents Gallon due to RINs

Myke Feinman
By  Myke Feinman , Refined Fuels Reporter

Valero Energy, an ethanol producer and gasoline refiner, predicts the increased cost of ethanol RINs would increase the cost of gasoline by 10 cents gallon this year.

Valero estimates D6 2013 ethanol Renewable Identification Numbers, the credits used by refiners, blenders and importers to show compliance with the Renewable Fuel Standard ethanol blending mandates, would increase Valero's costs by $500 million to $750 million compared to costs of $200 million to $250 million in 2012.

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2013 D6 RINs were less than 10.0 cents earlier this year, but averaged nearly 80.0 cents in March. D6 RINs were valued at 68.0 cents on Monday.

The price of gasoline "has to be higher," explained Bill Day, spokesman for Valero. "We will bear that cost to some extent, but we have no intention of bearing it all and will pass it on to consumers."

He said the elevated prices are hitting the East Coast now.

"It will probably hit the rest of country fairly soon if RINs prices stay high," he said.

Myke Feinman can be reached at myke.feinman@telventdtn.com.

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Martin Tjossem
4/3/2013 | 5:17 PM CDT
Thanks for your comeback Dennis. Interesting and I guess I better not argue with you since I have not been using E15, but higher blends. Wouldn't it be something if more is better---ethanol that is. Smiley
Dennis Hull
4/3/2013 | 5:04 PM CDT
Martin, please re-read my note: as stated, blends above and below 15% do not have the same effect on rubber seals as the 15% ratio. Test results and your experience indicate ratios well above 15% (your 30% to 50%) are ok. This "15% phenomenon" is not well known, but it is important so please excuse wordy discussion. However, let me first reiterate I am not advocating against more ethanol in gasoline, just not a 15% mixture. Chemists in the industry can explain why 15% is not good--I quote one explanation I was given: "you can see when you break up the dimer, trimer and tetramer configurations you are set up for h-bonding(they love to hitch a ride on the FKM VF2 monomer or the NBR/HNBR ACN monomer) with the attendant higher swelling. If you go back and reread something like Les Sperling�s �Interpenetrating Polymer Networks and Related Materials� you will see the 15% alcohol(by volume) is right on the raggedy of these possible dramatic swelling changes." end quote. I readily confess I don't understand the chemistry, but I am among many engineers in the automotive and rubber seal industries who have observed the higher swelling, softening and other chemical attack that occurs when rubber seals are exposed to E15 particularly at higher engine operating temperatures vs what happens in E10 and even 100% ethanol. I expect there have been studies relating to how far you can deviate from the 15% ratio to reduce impact--i.e. 12%, 20% etc.--but I have not seen the studies.
Martin Tjossem
4/3/2013 | 10:56 AM CDT
Dennis, I can tell you haven't actually had any experience with ethanol blends above 10%. I have been using 30 to 50% ethanol blends in a 1992 Toyota 4x4 since April of 2001, a 1995 Ford Aspire since August 2002, and 30% in a 2000 Buick LeSabre for about 4 years. Am I just lucky? I don't think so. Get real, E15 is a no brainer.
Dennis Hull
4/3/2013 | 9:51 AM CDT
Regarding increasing blend ratio to E15---Martin's general point is not affected, but the particular E15 ratio is not desirable. Many gasoline engine components (most particularly rubber and plastic seals and components) are sensitive to chemical attack by fuel blends and additives. Interestingly, tests have shown that an E15 blend ratio is particularly aggressive in attacking engine seals. Ethanol blend ratios below the 15% level are tolerated by seals in todays cars, and I have read ethanol blend ratios above 15% are not so harmful at least to rubber seals. That is why there has been ongoing congressional hearings trying to stop EPA from mandating that particular E15 ratio.
Martin Tjossem
4/2/2013 | 9:04 PM CDT
Meanwhile, wholesale ethanol is about 70 cents less than gasoline. If Valero just increased the blend rate with more E15 the prices would be less and RIN's wouldn't even be talked about. Makes you shake your head and wonder where management went to school.