Price at the gas pump unaffected by RIN Credits: report

May 21, 2015 |

RFS2-cutsIn Washington, retail gasoline prices from 2013 through the first quarter of 2015 were unaffected by prices for “RIN credits” (Renewable Identification Numbers) that are used to demonstrate compliance with the Renewable Fuel Standard (RFS), according to a new detailed statistical analysis conducted by Informa Economics, Inc.

The study found that “Changes in prices of renewable identification numbers (RINs) did not cause changes in retail gasoline prices from 2013 through the first quarter of 2015.” The researchers concluded that “Retail gasoline prices were driven primarily by movements in crude oil prices and secondarily by changes in the spread between domestic and international crude oil prices and the level of vehicle miles driven in the U.S., which varies seasonally

The new Informa analysis supports the findings of an April study by former White House economic advisor James Stock, who concluded that “…there is negligible estimated effect of RIN prices on pump E10 prices.”

Informa’s analysis uses “accepted and proven statistical methods to examine whether any type of causal relationship existed between RIN prices and retail gas prices since 2013. The results of the statistical tests revealed no relationship.”

RINsanity background

A system of renewable identification numbers was designed by the EPA for compliance with RFS2. A RIN is a 38-digit code representing a specific volume of renewable fuel. RINs are generated by a producer or importer of renewable fuel. Once the fuel is blended, the separated RINs can be used by obligated parties (mainly refiners) for compliance purposes, held in inventory for future compliance, or traded among companies.

The RIN credit is attached to the gallon of ethanol at the point of production and generally remains affixed to the gallon throughout the supply chain. Thus, when a blender or refiner purchases a gallon of ethanol, it is also receiving the attached RIN (at no additional cost). The RIN is separated from the gallon when the ethanol is physically blended with gasoline by an obligated refiner or blender. At this point, the RIN becomes a tradable instrument for demonstrating compliance with annual RFS blending requirements.

Market participants began to realize in early 2013 that ethanol usage could fall well short of levels needed to meet RFS2 going forward, and prices of conventional ethanol RINs (known as “D6” RINs) rose to levels that were multiples of any that had been experienced previously, spiking to nearly $1.50 during July 2013.

RFA comments on the study

RFA CEO Bob Dinneen commented, “Regrettably, some decision-makers appear to have bought into Big Oil’s erroneous suggestion that RIN prices are somehow connected to retail fuel prices. This report from Informa Economics sets the record straight and should clear up any remaining confusion about the relationship, or lack thereof, between RINs and consumer gas prices. Energy policy and regulation should be guided by science and thoughtful analysis, not Big Oil’s self-interested talking points.”

The study, which was prepared by Informa Economics on behalf of the Renewable Fuels Association, is available here.

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