U.S. renewable fuel credits hit multi-year high as oil group urges EPA to act

Source: By Stephanie Kelly, Reuters • Posted: Wednesday, March 17, 2021

NEW YORK (Reuters) – U.S. renewable fuel credits this week hit fresh multi-year highs, while an oil refining trade group urged the Biden administration to use its authority to help stabilize the market.

Prices for so-called Renewable Identification Numbers, or RINs, have climbed all year as costs for feedstocks such as soybean oil increase and as market participants bet on reduced exemptions granted to oil refiners that would waive them from U.S. biofuel blending requirements.

Under the U.S. Renewable Fuel Standard, refiners must blend billions of gallons of biofuels into their fuel mix, or buy tradable RINs from those that do. Refiners can apply for exemptions if they can prove the requirements do them harm.

The American Fuel & Petrochemical Manufacturers group argued in a letter dated Monday to the Environmental Protection Agency that uncertainty around blending obligations for 2021 – which have been delayed since a Nov. 30 deadline – have contributed to rising RIN costs.

The group said high RIN prices were threatening the viability of refiners already devastated by the coronavirus pandemic’s effect on fuel demand.

Renewable fuel (D6) credits for 2021 traded at $1.43 each on Monday, highest since at least 2013, according to Refinitiv Eikon data. Biomass-based (D4) credits traded at $1.50 each, highest since at least 2014. They were both slightly lower, at $1.41 and $1.48, respectively on Tuesday.

AFPM has previously argued that small refineries generally cannot blend renewable fuels themselves and have to purchase RINs in the spot market. Still, EPA said in a 2017 document that obligated parties, including small entities, generally recover the cost of acquiring RINs through higher sales prices of products they sell.

“We have to admit the possibility that the world changed a lot and maybe it’s been harder to pass through with the demand reductions we’ve seen … but until I see concrete evidence of that, the best evidence we have is pre-pandemic studies,” said Scott Irwin, an agricultural economist at the University of Illinois.

In its letter, AFPM also asked EPA to finalize proposed extended compliance deadlines for the RFS, and urged the agency to consider the demand destruction from the pandemic as it decides blending requirements for 2021.

Reporting by Stephanie Kelly; Editing by Marguerita Choy