RINs not driving any profits

Source: By Argus Media • Posted: Thursday, March 9, 2017

Houston, 7 March (Argus) — No one profits from credits used to track compliance with US biofuel mandates, Motiva chief executive Dan Romasko said today, wading into a controversy that has split the industry.

Refinery margins rise and fall to offset the cost of markers called renewable identification numbers (RINs) refiners and importers need to acquire to prove biofuels enter the US transportation supply each year, Romasko said.

His view counters merchant refiner arguments that have gained traction in recent weeks that the market creates “windfall profits” for large retailers and blenders, imperiling smaller retailers and refiners that do not operate blending businesses.

But there was no correlation between RIN prices and profitability in any segment along the downstream chain, Romasko said.

“We actually do not believe anyone pockets any profits from the RIN,” Romasko said. “What impacts margins across the refinery is what always has impacted margins in refining, and that is supply-demand variables.”

The broader refining industry has pushed to change or end biofuel mandates called the Renewable Fuel Standard (RFS), although over the past two to three years they have split over how it should change.

Merchant refiners including Valero, Monroe Energy and CVR Energy have argued that obligations under the mandates should fall closer to blenders at wholesale racks.

Moving the point of obligation would improve the efficiency of proving compliance, said Horace Hobbs, chief economist for Phillips 66, which supports the move.

Changing which companies must ensure mandates are met each year would create its own complexity, such as requiring wholesale companies seek out credits for advanced biofuels, rather than only ethanol or biodiesel, he said.

“RFS is a relic,” Hobbs said at the conference today. “Trying to figure out what you would like from the RFS is almost a a fool’s errand.”

More integrated operations — or refiners that blend and sell more fuel than they produce — consider the argument a distraction from an effort to repeal the overall mandates.

Motiva, today a joint venture between Shell and Saudi Aramco, plans to split into its own operations in early April. Motiva will operate a 600,000 b/d refinery in Port Arthur, Texas, backed by Aramco, and have wholesale racks throughout the southeast. Shell will take two refining and petrochemical complexes in Louisiana.

“Unfortunately, our attention on the RFS has been a bit diverted,” Romasko said.