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Corn-Based Ethanol RINs Drop on Outlook Law May Be Adjusted

July 25 (Bloomberg) -- The value of certificates that track compliance with a U.S. law to use corn-based ethanol dropped the most since March on speculation Congress will adjust biofuel consumption targets.

Renewable Identification Numbers, or RINs, for ethanol made from corn slumped 21 percent to 99 cents at 4:07 p.m. New York time, the lowest price since June 28 and steepest decline since March 12. The drop came a day after the House of Representatives’ Energy and Commerce Committee held hearings on the Renewable Fuels Standard.

Oil companies and biofuel backers disagree over whether the U.S. should keep the law calling for escalating amounts of ethanol in gasoline, and the requirement’s impact on the motor fuel’s price. Lawmakers at yesterday’s session, including Representative Fred Upton, a Michigan Republican and chairman of the committee, said modifications to the act are needed.

“You’ve got everyone from trade groups to Congress calling for a review,” said Michael Slider, director of business development at Fauser Energy Resources in Oregon, Illinois. “If there are any reductions, then the RIN values will obviously fall. You’ve got buyers that are wary.”

RINs rose to a record $1.43 on July 17 from 7 cents on Jan. 3, data compiled by Bloomberg show. Advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, tumbled 23 percent to $1, the biggest decline since Jan. 3. They were at 37 cents on Jan. 7.

Federal Mandate

The 2007 energy law mandates that refiners use 13.8 billion gallons of ethanol this year and 14.4 billion in 2014. RINs are attached to each gallon of biofuel and can be traded or sold among refiners.

Oil companies have called for repeal of the law, saying the targets would force them to sell gasoline containing ethanol beyond the previous 10 percent limit and more testing is needed to determine the effect that would have on engines.

Supporters of the biofuel argue that refiners should sell higher concentrations in gasoline, citing a 2011 Environmental Protection Agency ruling that allows for as much as 15 percent ethanol in the motor fuel for vehicles made after 2001.

The EPA this month sent the final rule for this year’s volume standards to the White House Office of Management and Budget for review.

“Furthermore, it appears that on the back of two days of congressional testimony this week on RIN and gasoline markets, that market participants are expecting action even sooner,” Aakash Doshi, an analyst at Citigroup Inc. in New York, wrote in a note today.

Doshi said RINs costs aren’t having an impact on retail gasoline prices because ethanol is the cheapest oxygenate to mix with the motor fuel and trades at a discount to it.

To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net

To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net

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