A Return to Rinsanity

Ethanol RIN values pushed up to All-Time highs in today’s trading.  The market settled 139 bid vs 139.5 for the 2021 ethanol RIN.  This mirrors the highest previous close for an ethanol RIN back on July 22, 2013.  Similarly, the D4 biodiesel RIN is quickly reapproaching record highs from 2013 as well.  The 2021 biodiesel RIN ended the day 144 bid vs a 145 offer, settling short of its 2013 high of 148½.

Rising feedstock costs and market uncertainty are each playing a part in supporting current price levels.  The Bean oil/heating oil spread (BOHO) is also moving towards all-time highs and causing biodiesel RIN values to rise along with the spread. The BOHO measures the profitability for producing biodiesel from soybean oil.  The higher the spread the more costly production. When the spread rises, RIN values will generally rise in order to offset increased production costs.

Rising RIN values cause compliance cost for obligated parties to increase.  A year ago an obligated party needing to purchase biodiesel RINs could have done so for 50 cents per RIN, today each RIN is $1.44½. This is troublesome for obligated parties.  Some have had the foresight to begin switching underperforming assets into renewable fuel production, primarily renewable diesel, in an effort to reduce RIN exposure.  Others may not have that option. Many will recall the term RINsanity.  It was a term used to describe the rapid runup in RIN values that occurred over the first eight months of 2013.  The market has now returned to those levels.

The recent calm between agricultural interests and oil interests is set to be tested as RIN values continue to increase.  The Supreme Court is expected to make a ruling next month on the fate of small refinery waivers and how the EPA applies them.  In recent years, the EPA had been granting waivers to almost any small refiner that applied for one.  The 10^thCircuit Court of Appeals ruled that small refiners were only eligible to receive a waiver if they had been doing so on a continuous year to year basis.  If it wasn’t continuous, then they were not entitled to come back for relief.  There were only seven exemptions granted for 2015, far fewer than the 37 granted for 2017.  Should the Supreme Court agree with the 10^th Circuit, SREs will become a thing of the past.