Price of US biofuel credits plummets

The price of US renewable fuel credits has plummeted, hitting a two month low according to Reuters.

Efforts by the White House to mediate talks between the oil and corn industries over the Renewable Fuels Standard (RFS) are said to be behind the fall in prices.

The RFS requires refiners to blend increasing amounts of biofuel into the US fuel supply. Under the RFS programme, fuel refiners lacking sufficient infrastructure to blend in biofuels themselves must instead buy credits, dubbed renewable identification numbers (RINs), to comply with the biofuel blending quota.

These blending quotas have become an increasing cause of controversy; popular with the corn industry, but not with the oil industry. Major oil companies claim the RFS costs the refining industry millions of dollars each year, and is threatening to put some oil refineries out of business.

Earlier this year, refiners petitioned the Environmental Protection Agency (EPA) to shift the RFS point of obligation to companies ‘closer to consumers,’ such as blenders. The petitioned was rejected by the EPA, the Agency stating that the shift would fail to deliver any benefits in encouraging renewable fuels use.

On 13 December, representatives of the US oil and corn industries met at the White House to look for a compromise. According to Reuters, it was agreed at this meeting that Texas Senator Ted Cruz would “circulate proposals to corn-state lawmakers in the weeks ahead that could help oil refining companies meet the RFS.”

The meeting was attended by staff from the offices of Cruz and Republican Senator Pat Toomey of Pennsylvania, who represent oil refining states, and staff from the offices of Iowa Republican Senators Chuck Grassley and Joni Ernst, and Nebraska Senator Deb Fischer of Nebraska, who represent 'corn states'. Officials from the White House, the US Environmental Protection Agency and the US Department of Agriculture also attended, Reuters reports.

“While we are happy to review any proposals Senator Cruz offers in the time ahead, we remain firm that our top priority in these meetings is ensuring that the spirit and the letter of the RFS is supported as intended by Congress,” Ernst spokeswoman Leigh Claffey said.

 

Market responds

On 13 December, renewable fuel credits were traded at roughly 74 cents, the lowest levels since early October, according to the Oil Price Information Service. By comparison, at the end of November the credits were trading at 90 cents each.

According to traders cited by Reuters, there was also some unexpected selling by small refiners that were granted waivers from the programme by the EPA.

“The small refiners were bringing the price down, but the talks in DC really added fuel to the sell off,” a trader told Reuters.