Credit volume and the average price paid per credit advanced higher in California’s Low Carbon Fuel Standard (LCFS) this week

The average credit price pushed up $1.04 to $194.59. Third quarter transactions remain elevated and well supported by high credit prices. Weekly credit volume increased in the latest weekly report with a total of 239,600 credits trading during the week ending Aug 18. This is up 14 percent from last week but 10 percent below the same weekly period last year.  The 2019 average volume increased from 207,241 to 202,222. The average number of transactions taking place during the week is 23. Third quarter credit volume is 66 percent over second quarter volume and 38 percent above the same quarterly total last year.

Trading volume was heaviest on Wednesday with 47 percent of the volume being transacted.  The highest average daily price was $197 which occurred on Thursday. The price range credits traded in narrowed from to $177 – $199 last week to $184 – $197.68 in this week’s report. The weighted-average credit price increased to $194.59. The value of the weeks credit transactions totaled $40.62 million.  At the top of the range 19,000 credits traded at $197.68 and 10,000 traded at the bottom of the range at $184. Fifty one percent of the credits traded at a price between $195 and $199 and 46 percent traded between $190 and $195.

The Jacobsen expects credit volume will exceed last year’s pace. An additional 1.755 million credits from biodiesel and renewable diesel are forecast to be generated within the California market during 2019. There were 11.18 million LCFS program credits generated during 2018 and 13.7 million forecast for 2019.    Renewable diesel and biodiesel credit generation is expected to reach 6.62 million, or 48 percent of all program credits generated.

CARB only includes transfers that are completed in the given week. Transfers for future dates, proposed and still pending confirmation, are excluded.  CARB’s weekly report excluded three transfer of 7,830 credits. CARB will exclude transfers that trade at, or near, zero in price.

Biodiesel Market

RIN prices moved into rally mode as the market is buying into the premise that the Trump administration might offer an olive branch to the biofuels industry for lowering official renewable volume obligations through the use of small refinery exemptions.

For those keeping score at home regarding SREs, there are 53 small refineries in the United States.  For RFS purposes, the five in Alaska are omitted, leaving 48. Of the RFS eligible refineries, 83 percent applied for SRE’s.  78 percent of those applications were granted.

Nothing definitive have been disclosed regarding how the administration might assuage the renewable fuel industry, but a number of options have been put forth.  Supposedly, during the Oval Office meeting on Monday, the idea of mandating auto companies to make all vehicles capable of running on a variety of fuels came up.  That idea was quickly put to rest.

A more salient idea was to change the current fuel policy for ethanol to make E15 the new standard, replacing E10. It is somewhat amazing how quickly discussions change regarding the 10 percent ethanol blend.  It was only a year or so ago that it was considered impossible to pierce the 10 percent blend wall.

Another more promising idea that has been talked about is to boost the amount of biomass-based diesel and conventional renewable fuel refiners are required to blend over the next several years to offset the erroneous use of SREs.  This would force non-exempt refiners to make up for lost quotas.

Biodiesel RINs managed to rally two to 2.25 cents and ethanol RINs pushed three to 3.25 cents higher today. After the EPA released the news regarding the 31 SREs on August 9, biodiesel 2019 RINs dropped 17 percent immediately, ethanol 2019 RINs sank 39 percent, but the full move took three trading days for the E19’s.  Today, the 2019 biodiesel RIN is only down seven percent from the SRE announcement, but the ethanol 2019 RIN is still down 25 percent.

INDUSTRY-RELATED NEWS

Aug 16 (KCCI)  Grassley says EPA ‘screwed’ farmers with biofuels exemptions – During a taping of Iowa Public Television’s “Iowa Press” program Friday, Grassley was asked his thoughts on 31 refinery exemptions the Environmental Protection Agency issued for 2018 and approved after a review last week. He responded: “They screwed us.”  President Donald Trump promised farmers , who largely supported him in the 2016 election, he would support ethanol production.  READ MORE

Aug 16 (DTN)  Report: Trump Ordered Waivers – The president sided with oil refiners over ethanol producers and corn farmers, just two months after reiterating his support for ethanol at a rally held at Southwest Iowa Renewable Energy in Council Bluffs, Iowa, to celebrate the approval of year-round E15 sales.  Trump essentially ended what was an ongoing review of the waivers program, leading biofuels interest groups to question whether the administration changed course on its biofuels policy.   READ MORE

Aug 16 (Reuters)  Trump intervention triggered EPA’s surprise biofuel waiver decision -sources  – A phone call from U.S. President Donald Trump last week ended a nearly two-month-long review of the nation’s biofuels program, three sources familiar with the matter said, with the White House siding in favor of oil refiners over corn growers.”The president has heard from all sides and in the end he has had enough of it. He called Wheeler and gave him the green light,”  READ MORE

I always look forward to hearing from our customers.  Please feel free to contact me with any questions, comments, or suggestions you may have.  If you buy, sell, or trade any of our products, I would like to hear from you.  Bob Lane at [email protected]  847-549-3640.