Study: Gas Price Rise Not Due to RINs

Ethanol Group Tries to Debunk Oil Industry Claims About Renewable Identification Numbers

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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A new Informa study finds the prices of biofuel credits in the Renewable Fuel Standard have not caused higher gasoline prices. (DTN file photo)

OMAHA (DTN) -- The prices of renewable identification numbers, or RINs, have not caused increases in gasoline prices from 2013 to 2017, according to a new Informa Agribusiness Consulting study funded by the Renewable Fuels Association.

In recent years, oil industry groups such as the American Petroleum Institute have claimed rising gasoline prices were a result of compliance with the Renewable Fuel Standard -- more precisely when it comes to the cost of buying biofuel credits.

Instead, the report released on Monday said prices at the pump have been driven by movements in crude oil prices, changes in the spread between domestic and international crude prices, and seasonal demand.

The U.S. Environmental Protection Agency is taking heat from biofuels groups, federal lawmakers and others for proposed changes to the RFS. Proposed changes reportedly include attaching RINs to exported biofuel gallons. The biofuels industry has expressed concern the change essentially would flood the market with RINs and drive down prices of the credits. In addition, the EPA recently proposed further reductions to RFS volumes for 2018.

"EPA seems to be on a mission to lower the price of RINs," RFA President and CEO Bob Dinneen said in a statement about the Informa analysis.

"The agency's proposed 2018 RFS renewable volume obligations, which for the first time lowered the total RFS volumes from the previous year, a subsequent notice of data availability proposing to lower the RFS further to reflect anticipated reductions in imported biodiesel, and rumors of an impending proposal to allow exported biofuel to qualify for the domestic program, all would have the effect of lowering the price of RINs. But this analysis demonstrates that EPA's efforts will have no impact on consumer gasoline prices."

Dinneen said the oil industry "needs to stop scapegoating the RFS and ethanol. The RFS is helping to bring the cleanest, lowest-cost and highest-octane fuel to consumers, and no amount of obfuscation can dispute that fact."

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Sen. Charles Grassley, R-Iowa, and other lawmakers are scheduled to meet with EPA Administrator Scott Pruitt on Tuesday to talk about the recent RFS developments.

The new Informa analysis said the rise and fall in gasoline prices has been connected to the crude oil markets for years, long before the first RFS in 2005.

"It should be remembered that RINs were created only in the aftermath of the establishment of the Renewable Fuel Standard in 2005, and the differentiation of RINs by biofuel category did not take effect until 2010, whereas gasoline prices have been volatile for decades," the report said.

"The primary driver of retail gasoline prices is crude oil prices, as crude oil is the primary input to gasoline production. Historically, the running 24-month correlation between crude oil and retail gasoline prices has generally been between 0.80 and 0.99, which indicates a very strong relationship, given that a coefficient of 1.00 would indicate perfect positive correlation."

The analysis also said a "majority of the movement in gasoline prices" can be attributed to changes in crude oil prices.

On March 27, 2013, farm doc at the University of Illinois at Urbana-Champaign published a study, "High Gasoline and Ethanol RINs Prices: Is There a Connection?"

Farm doc said it was difficult to "nail down precisely" how or if high RIN prices affect retail gasoline prices.

"This situation does not mean we are left totally in the dark about the possible impact of rising RINs prices," farm doc said.

The study found that the price of CBOB gasoline at Chicago "generally declined" in the final three months of 2012. Then it began to move higher in late December, "prior to the start of the rally in D6 RINs prices."

Then, RIN prices started to rise in January 2013, peaked in early March, and then "declined modestly." Farm doc said the timing of the increase in CBOB gasoline prices "predates the increase in RINs prices by several weeks, which casts doubt on RINs prices as a significant driver of gasoline blendstock prices."

The analysis found CBOB prices were lower in late March than in October, "further suggesting that factors other than RINs prices dominated CBOB prices."

Farm doc found those companies that "must routinely buy RINs to meet their RVO are financially disadvantaged and have a clear incentive to pass along the higher prices in the supply chain to the degree it is feasible."

Read the new Informa analysis here: http://bit.ly/…

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

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Todd Neeley