RINs are Free

By Bob Dinneen | August 09, 2013

There's absolutely no correlation between retail gas prices and ethanol renewable identification number (RIN) prices. RINs are free. Let me repeat. RINs.  Are. Free. 

Ethanol producers are required to give RINs to refiners and gasoline marketers when they purchase a gallon of ethanol. It’s simple. Buy a gallon of ethanol, get a RIN for free.

Today, as the renewable fuel standard (RFS) requirement drives ethanol demand beyond 10 percent blends, a thinly traded and opaque market for RINs is developing so that oil companies can trade RINs amongst themselves to ease compliance. Unfortunately, oil companies would rather drive up the price of RINs than invest in E85 pumps or allow the sale of E15. 

Instead of blending to higher levels, Big Oil pulled out a play from their scare tactic playbook. They claim that rising RIN prices are being passed down to consumers and increasing gas prices at the pump. But facts can be nettlesome when you’re trying to mislead folks. You see, gasoline prices were actually falling when RIN prices spiked in March, and gasoline prices have been falling again since early June while RIN prices have escalated. The correlation of RINs to gas prices since Feb. 1 has been -0.3, meaning that increasing RIN prices correlate best to decreasing gas prices!

At a recent U.S. House Energy and Commerce Subcommittee hearing on the RFS, I sparred with Jack Gerard, president of the American Petroleum Institute, over Big Oil’s false assertion that RINs are impacting gasoline prices. Curiously, the day after the hearing, RIN prices plummeted. It seems rising RIN prices have a better correlation to congressional hearings than to gasoline prices! Hmmm.  

Big Oil doesn’t like paying for RINs but the rational solution to their problem is obvious. Blend more ethanol. 

 

Author: Bob Dinneen
President and CEO,
Renewable Fuels Association
202-289-3835