Study says fixing RFS is getting easier and easier

February 17, 2018 |

In Illinois, a new study from the University of Illinois analyzes why the gap between the ethanol blend wall and the conventional ethanol mandate is so important to understanding the movement of ethanol RINs prices, how the gap is rapidly shrinking, and what this means for the future ethanol RINs price levels.

The report said that “The political battle over the RFS has centered on the high price of ethanol RIN credits that are used to comply with the RFS conventional ethanol mandate. We show in this article that high D6 RINs prices can be directly traced to conventional ethanol mandates that exceed the E10 blend wall, creating a gap that has to be filled by biodiesel. When biodiesel takes on the role of the “marginal gallon” for filling the conventional ethanol mandate, this forces the price of a D6 ethanol RINs to equal the much higher price of a D4 biodiesel RINs. This is essentially the story of the RFS and the resulting political battles since 2012. What has received little notice is how rapidly the conventional ethanol gap has shrunk since 2014 due to the combination of: (1) the crash in crude oil prices stimulating gasoline consumption, and (2) an improving economy. This means it is not out of the realm of possibility for D6 RINs prices to fall back their pre-2013 level of just a few cents without making any changes to the RFS. In this sense, “fixing” the RFS is getting easier and easier.”

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Category: Policy

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