Financial Times: US ethanol credits soar to fresh high

July 16, 2013

Gregory Meyer, July 15- The credits, known as renewable identification numbers, jumped to a record $1.25 per gallon early on Monday, surpassing previous levels reached in March, according to Starfuels, a broker.

US federal law requires refiners and wholesalers to blend increasing amounts of biofuels each year into the petrol they sell.

They can also buy RIN credits in lieu of meeting blending obligations. The credits are generated when biofuels are produced and later sold on secondary markets.
Oil companies are expected to be growing buyers of RINs.

In 2013, the US biofuels standard requires 13.8bn gallons of corn-derived ethanol to be blended with petrol.

But, with most oil companies refusing to blend more than 10 per cent ethanol to meet overall domestic petrol demand that is estimated at 133bn gallons, they will fall short of the mandate and need RINs to stay in compliance.

By 2014, the stock of RINs could tighten as blending requirements rise further. The US Environmental Protection Agency, which administers the mandate, has said it plans to announce targets for ethanol consumption this summer.

“It’s really not a pretty picture next year,” said a US east coast ethanol blender.

Oil companies have warned they will pass higher RIN prices to consumers at the pump.