Huge Span of Ethanol Prices Seen as Some Suppliers Go RIN-Less

Source: By Tom Kloza, OPIS • Posted: Thursday, November 16, 2017

By all accounts, ethanol is one of the more fungible energy products. It has a consistency of specifications regardless of whether the grain alcohol is produced from corn, potatoes, sugar cane, barley or other biomass.

Yet, these days it is not uncommon to find ethanol prices that span a cost from as little as 45cts/gal to as much as $2.19/gal. The high end of that range can be attributed to the cost of shipping product to coastal extremes, but a different factor separates the numbers at the low end. The suddenly wide nature has everything to do with whether Renewable Identification Numbers (RINs) are attached.

Spot prices, for example, are typically quoted for storage in the Chicago area and matched a 27-month low mark yesterday when $1.38/gal exchanged hands. Spot transactions always include the privilege and the substantial credits that come with generating D6 2017 ethanol RINs as the alcohol is eventually blended into finished motor fuel, in most cases an E10 regular grade of gas.

But a funny thing commenced about a month ago. Multiple suppliers, including Glacial Lakes Energy, Absolute Energy, the Andersons and ultimately Sinclair, began posting prices that did not include the title of the RIN as ethanol moved from producers to marketers. Most ethanol rack prices don’t have such restrictions, but the RIN-less variety has brought propagation of ethanol values as low as 40cts/gal in recent weeks.

Ethanol advocates say that the RIN-less variety of rack prices allows for the small retailers to blend additional ethanol, without the burden of accounting that comes with regularly being a blender of record. Detractors say that the pricing is a “gimmick” and note that there are very few geographic havens where marketers can find an appropriate blendstock to which they can add ethanol whether it’s RIN-less or not.

Indeed, a look at OPIS rack prices in more than 400 terminals finds few instances of pure hydrocarbon blendstock availability. And where there is a gasoline blendstock, the price is often prohibitive for splash blending.

But a similar glance at ethanol postings across hundreds of terminals does indeed reveal prices that at first glance might seem appropriate for the gasohol era in the 1970s. Locations like Columbia, Mo., and Omaha and Doniphan, Neb., find ethanol postings as low as 54.45cts/gal, but the alcohol is RIN-less. With

D6 ethanol RINs fetching a contemporary value of around 85cts today, the sellers can end up selling the RINs for substantially more than the denatured alcohol.

Ethanol in Houston even shows up for $1.254/gal, with no RINs attached. That price puts it about 45cts/gal below the price of a 10% blend of ethanol and 90% reformulated gasoline.

RIN-less ethanol is not likely to lead to more widespread sales of E15, sources note. Most of the retailers that are offering E15 choose to start with E85 in a dedicated tank, and simply add E10 to get to the target alcohol content and octane.

Most marketers do not yet have the equipment to achieve that blending, so expect the war between small distributors and retailers and the ethanol business to continue.

In the meantime, however, there are similarly eye-opening prices for E85 or some of its “cousins” with 50% or 70% ethanol content. OPIS found numerous posted prices for these grades at less than $1/gal, particularly in the Midwest, thanks to the magic that the D6 RIN delivers.