RFA-Commissioned Analysis Shows RINs Have No Impact on Retail Gas PricesTue, 07 Jan 2014 14:51:02 CST
Retail gasoline prices were unaffected by the erratic surge in prices for Renewable Identification Number (RIN) credits in 2013, according to a detailed statistical analysis conducted by Informa Economics, Inc. and commissioned by the Renewable Fuels Association (RFA).
“Changes in prices of renewable identification numbers (RINs) did not cause changes in retail gasoline prices in 2013,” according to a 7-page report summarizing the analysis. “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.”
In essence, a RIN is a unique “serial number” used under the Renewable Fuel Standard (RFS) regulation to commemorate the production of one gallon of ethanol. The RIN 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 an instrument for demonstrating compliance with annual RFS blending requirements.
Informa’s analysis examined whether any type of causal relationship existed between RIN prices and retail gas prices in 2013. Informa reported no relationship. “Although retail gasoline prices and RIN prices both increased in early 2013 and remained elevated (though volatile) during the middle of the year, this was mainly coincidental, and upon closer examination it can be determined that these changes generally occurred for different reasons,” the report concluded. “In fact, the increase in gasoline price early in the year actually pre-dated the increase in RIN prices.”
Commenting on the report, RFA President and CEO Bob Dinneen said, “This analysis should put to rest the oil industry’s ridiculous assertion that RINs somehow affect the retail price of gasoline at the pump. The bottom line is that RINs are free for refiners who purchase and blend required volumes of ethanol with gasoline. Only those refiners who stubbornly refuse to blend required ethanol volumes have a need to buy RINs on the open market; and in the highly competitive gasoline marketplace, there is no way they can pass those costs on to consumers and remain competitive with refiners and blenders who are blending more ethanol than required. Some refiners and blenders are actually profiting from the sale of RINs. The market is essentially a closed loop, with some participants incurring costs and others reaping profits. In the end, it’s a zero sum game, and the price a consumer pays for gasoline is unaffected.”
Dinneen continued, “Unfortunately, some key decision-makers appear to have bought into Big Oil’s threats and sham analysis suggesting that higher RIN prices will lead to higher 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 gas prices. Energy policy and regulation should be guided by science and thoughtful analysis, not Big Oil’s bombastic talking points.”
The RFA-commissioned Informa report is available here.
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