Why Commodity Prices Sank on News Biden Administration is Reviewing Relief for Oil Refiners

Source: By AgWeb • Posted: Tuesday, June 15, 2021

The commodity markets came under pressures Friday. Corn and soybean prices sank, which was partially due to a report the Biden Administration is considering ways to provide relief to U.S. oil refiners from biofuel blending mandates.

The report from Reuters quoted three sources familiar with the matter. The story said refiners are required to blend billions of gallons of biofuels including ethanol into their fuel every year or buy credits from refiners who do. Those credits, called Renewable Identification Numbers (RINs) were at their highest prices in history before tumbling on Friday.

Some refiners claim the program threatens to bankrupt fuel producers still trying to recover from a drop in demand sparked by the pandemic.

“What we’ve seen is the fact that every time RINS get over $1, the phone doesn’t stop ringing at the EPA,” says Peter Meyer, Head of Grain and Oil Seed Analytics S&P Global Platts. “Now we’re at $2. So the pressure had to be intense.”

Meyer says this only adds to the uncertainty of the Renewable Fuels Standard (RFS). According to reports, some of the options being considered include a nationwide general waiver that would provide an exemption from some obligations, while lowering the amount of renewable fuel refiners must blend in the future. There is also talk about creating a price cap on credits.