Oklahoma Farm Report masthead graphic with wheat on the left and cattle on the right.
Howdy Neighbors!
Ron Hays, Director of Farm and Ranch Programming, Radio Oklahoma Ag Network  |  2401 Exchange Ave, Suite F, Oklahoma City, Ok 73108  |  (405) 601-9211

advertisements
   
   
   
   
   
   
   
   
   
   

Agricultural News


New Analysis Says RIN Prices of 'Just a Few Cents' Could be in the Pipeline Without Changes to RFS

Fri, 16 Feb 2018 11:59:57 CST

New Analysis Says RIN Prices of 'Just a Few Cents' Could be in the Pipeline Without Changes to RFS A new analysis from the University of Illinois shows that the conditions that caused high conventional biofuel (D6) RIN prices are changing rapidly and that “…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.”



The authors argue that high D6 RIN prices have been driven by the “gap” that exists between domestic ethanol consumption (estimated at 14.5 billion gallons in 2017) and the 15-billion-gallon statutory requirement for conventional renewable fuels. The size of that “gap” continues to shrink rapidly as E10, E15, and E85 blending has expanded. Thus, as that expansion continues at a rapid pace, the “gap” will be fully closed and RIN prices will fall dramatically. As the Renewable Fuels Association has pointed out, this is exactly how the RFS was intended to work. Establishing RVP parity for E15 would certainly help accelerate the closing of that gap. Specific findings from the University of Illinois report include:



- “What seems to have gotten lost in all the noise surrounding the political war over the RFS is how rapidly the conditions are changing that created the high ethanol RINs prices in the first place. The key is the "gap" between the ethanol blend wall and the conventional ethanol mandate.”


- “With the statutory conventional ethanol mandate fixed at 15 billion gallons, the growth in ethanol use has led to a sharp decline in the magnitude of the conventional gap. In particular, the latest ethanol use estimate from the EIA for 2019 implies a conventional gap of a little less than 300 million gallons. This gap is so small that an increase in projected ethanol use for 2019 of just two percent would erase the gap completely.”


- The bottom-line from this analysis is that the conventional ethanol gap is well on its way to being eliminated in the next few years, even without a large expansion in the use of higher ethanol blends such as E15 and E85. If this does occur, the impact on D6 ethanol RINs prices could be almost as profound as what we witnessed in 2013, but in exactly the opposite direction.


- “It is not out of the realm of possibility for the price of D6 RINs to go back to their pre-2013 level of just a few cents. Of course, this assumes that the conditions that have been driving ethanol consumption upward do not change. Even if conditions do change, the size of the conventional gap is much more manageable than just a few years ago and opens the door for very modest increases in E15 and/or E85 to close the conventional gap. For example, a 300 million gallon conventional gap could be eliminated with an increase in E15 consumption of just 2 billion gallons, or about 1.3 percent of total gasoline consumption.”


- “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.”



“The first supposed ‘blend wall’ was the 10% ethanol blend level. Well, we crashed through that last year and are now blending above 10.0% nationally,” said Renewable Fuels Association President and CEO Bob Dinneen. “But the next blend wall is the 15-billion-gallon allotment for conventional ethanol. With increased E15 and E85 blending, we are careening toward smashing that wall as well. It seems, however, that the closer we come to that wall, the more intent some refiners become in hitting the brakes, insisting upon RFS demand destruction as the only safe course. This analysis lays waste to that false premise, and demonstrates, as we have insisted for years, that increased ethanol use will also break the 15-billion-gallon wall and lead to lower RIN prices. And RVP parity for E15 would lower RIN prices even more quickly while leaving the RFS intact. Now that’s a win-win,” he added.



Source - Renewable Fuels Association




   

 

WebReadyTM Powered by WireReady® NSI

 


Top Agricultural News

  • Friday Market Wrap-Up with Justin Lewis  Fri, 14 Dec 2018 14:56:56 CST
  • Oklahoma Grain Elevator Cash Bids as of 2:00 p.m. Friday, December 14, 2018  Fri, 14 Dec 2018 14:50:13 CST
  • Ellen Coblentz of Chouteau, Okla. Recognized as a Significant Woman in Agriculture by ODAFF  Fri, 14 Dec 2018 14:39:05 CST
  • Friday Afternoon Market Wrap-Up with Carson Horn  Fri, 14 Dec 2018 14:00:07 CST
  • Farm Bureau Contends New USDA Broadband Program Will Boost Local Economies in Rural America  Fri, 14 Dec 2018 13:54:46 CST
  • CattleFax's Upcoming Webinar to Outline Beef Industry Analytics Firm's Market Expectations for 2019  Fri, 14 Dec 2018 12:25:15 CST
  • Noble's Dr. Myriah Johnson Defines What Antimicrobial Stewardship Means for Cow-Calf Producers  Fri, 14 Dec 2018 12:20:50 CST
  • OSU's FAPC Center Releases Its Top 10 Food Safety Tips for the 2018 Chirstmas Holiday Season  Fri, 14 Dec 2018 12:02:53 CST

  • More Headlines...

       

    Ron salutes our daily email sponsors!

    Livestock Exchange Oklahoma Ag Credit Oklahoma Farm Bureau National Livestock Credit P&K Equipment Tulsa Farm Show Stillwater Milling KIS FUTURES, INC. Oklahoma Cattlemen's Association

    Search OklahomaFarmReport.com

    Find more about Weather in Oklahoma City, OK

       
       
    © 2008-2018 Oklahoma Farm Report
    Email Ron   |   Newsletter Signup   |    Current Spots   |    Program Links

    WebReady powered by WireReady® Inc.