Refiners Face ‘Real Stinker’ U.S. Fuel Credits: Chart of the Day

Surging prices for credits that allow oil refiners to meet U.S. renewable-fuel regulations are separating the industry into winners and losers, according to Chi Chow, a Macquarie Group Ltd. analyst.

The CHART OF THE DAY displays the price of credits from blending gasoline with ethanol, along with those for biodiesel and advanced biofuel. The data was compiled by Starfuels Inc., an energy brokerage based in White Plains, New York, for what are known as renewable identification number credits.

Prices for ethanol-related credits have soared as much as 15-fold since January. They rose above $1 a gallon last week, and so did their biodiesel and advanced biofuel counterparts.

The price increases are "a potential real stinker of an issue" for refiners that satisfy the Environmental Protection Agency’s standard by buying credits, Chow wrote yesterday in a report. In response, he cut ratings on shares of Valero Energy Corp., the world’s largest independent refiner by processing capacity, and HollyFrontier Corp. as well as CVR Energy Inc., controlled by billionaire Carl Icahn.

Refiners with the capability of blending ethanol into gasoline are in a better position, the Denver-based analyst wrote, because they can earn credits through their operations. The report cited Marathon Petroleum Corp., Northern Tier Energy LP, Tesoro Corp. and Western Refining Inc. as examples.

Even so, the cost of complying with the renewable-fuel program "is threatening to derail the bull run" in refining stocks, Chow wrote. A Standard & Poor’s index of refiners and gasoline-station owners dropped in six of the past seven days after more than doubling from a low set on June 4.