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Why RINs Could Be 2013's 4-Letter Word For Gas Prices

Tyler Durden's picture




 

RIN is the mechanism for enforcing the Renewable Fuel Standards (RFS) - Suppliers can either blend their own to meet standards OR buy RINs from other blenders... due to weather issues last year 2012 RINs were in short supply - and with Feb as the last date to pay for them we saw prices surge. These RIN prices were passed on to customers at the pump. The problem is there is now not enough for 2013 (and even less for 2014) which means that instead of $0.03, RINs for 2013 could stay high in the $0.75 to $1.00 range (depending on ethanol production) and higher for 2014. This could mean the implementation of several possible alternatives - dependent on exogenous factors such as the supply of feedstock (corn, soybeans, sugar and palm oil) and spare biofuel production and blending capacity - supporting corn prices but the higher prices, we suspect, will lead Congress to revise (lower) its RFS mandates. At current levels, given the weighting of renewable fuels, RINs are adding around 7c to each gallon at the pump; should the RINs rise to $3, then that will mean a 10% rise in the price at the pump implying a 0.9% drag of GDP growth - something our Congress won't accept.

 

 

Via Goldman Sachs,

The key to the recent rally in RIN prices, the instrument used to enforce the US Renewable Fuel Standard, has been the looming inability to blend as much conventional (corn) ethanol as mandated in 2013 and 2014. In particular, while the 2013 requirements will still be met by drawing down carryover of 2012 RINs, there will not be enough 2013 carryover RINs to achieve this in 2014. As a result, our recent analysis showed that it would take several large adjustments to overcome the 2014 shortage in ethanol (D6) RINs.

Unfortunately, the 2014 shortage in D6 RINs likely just got bigger. The EPA RIN reporting system was updated to now include data for February, a key month by the end of which obligated parties need to comply with their 2012 obligations.

 

Detailed paper here - everything you need to know about RINs and were afraid to ask...

Gs Labyrinth

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Mon, 04/08/2013 - 21:51 | 3424663 Big Ben
Big Ben's picture

So the EPA will give the economy a bad case of the RINs?

Mon, 04/08/2013 - 22:02 | 3424695 Manthong
Manthong's picture

A Federal Government RIN job?

But maybe with a .9% drag on the economy  we can score another cool quarter trillion or so free Bernanke bucks for Obamba to blow on stuff like exploding slot cars or California solar scams.

Mon, 04/08/2013 - 22:16 | 3424737 SnobGobbler
SnobGobbler's picture

nah..nah  the "enforcement vehicle" is a slot-machine in a tight casino.  (derivatives bitchez) BOOM!

Mon, 04/08/2013 - 23:37 | 3425019 knukles
knukles's picture

"I promise you that the Affordable Care Act will lower your gasoline prices."
  - Paul (prior consultant to Enron) Krugman

Tue, 04/09/2013 - 06:56 | 3425430 Bicycle Repairman
Bicycle Repairman's picture

It seems no matter what, various kinds of ridiculous eco-taxes are going to be applied to gasoline.  This is why the price of gasoline does not go down even though usage has dropped like a rock.  America could get completely energy independent with cheap oil and it's not going to matter.  Leviathan must consume all.

Mon, 04/08/2013 - 23:56 | 3425078 TraderTimm
TraderTimm's picture

So, RINs have an exponential curve but they're not a bubble?

Where are the claims RINs will crash to zero?

Tue, 04/09/2013 - 08:40 | 3425730 beaker
beaker's picture

What a stupid fucking article.  He left out one tiny detail that ethenol is blended at only a bout a 10% rate! So multiply all this hype by .10. That's what is being added to cgas prices.

Tue, 04/09/2013 - 10:15 | 3426242 post turtle saver
post turtle saver's picture

... which is planned to soon go to a 15% rate (E15).

Mon, 04/08/2013 - 22:00 | 3424671 otto skorzeny
otto skorzeny's picture

midwest is getting rain and cool temps-will be biggest corn yield ever-book it. corn prices are already dropping.if grain prices come down it will keep food inflation in check and buy QE4EVA some more time.

Mon, 04/08/2013 - 22:13 | 3424724 Seasmoke
Seasmoke's picture

Bernanke is a lucky guy. Is he Irish ?

Mon, 04/08/2013 - 23:38 | 3425022 knukles
knukles's picture

Leprechaun
Fucking hoot at the Congressional St. Paddy's Day Party

Tue, 04/09/2013 - 07:00 | 3425433 Bicycle Repairman
Bicycle Repairman's picture

Shalom O'Bernanke:"Where's me pot of gold?"

FED toady: "You leased it to the bankers who sold it to you-know-who."

Shalom O'Bernanke:"Begosh and begorrah!"

Mon, 04/08/2013 - 21:56 | 3424678 Zer0head
Zer0head's picture

Yo RINny

Mon, 04/08/2013 - 22:38 | 3424829 ILLILLILLI
ILLILLILLI's picture

RIN Tin Tin...

Mon, 04/08/2013 - 21:59 | 3424683 surf0766
surf0766's picture

Only idiots burn their food for fuel.

Mon, 04/08/2013 - 22:12 | 3424720 The Second Rule
The Second Rule's picture

nice one

Mon, 04/08/2013 - 22:22 | 3424765 RafterManFMJ
RafterManFMJ's picture

Concur, but probably better than drinking it as GMO corn syrup.

Tue, 04/09/2013 - 02:10 | 3425233 Major Major Major
Major Major Major's picture

Both brought to you by none other than Monsanto.

Check out what they tossed $7 million at last year: http://biosynthetic.com/

Tue, 04/09/2013 - 02:34 | 3425260 zhandax
zhandax's picture

Far better to drink it as fine corn liquor.

Mon, 04/08/2013 - 22:39 | 3424826 duo
duo's picture

Only idiots inject toluene and other toxic waste into the ground where their water comes from.

Mon, 04/08/2013 - 22:49 | 3424862 Stuck on Zero
Stuck on Zero's picture

Yep.  We pay through the nose to raise gasoline and food prices and increase pollution. That's government at work.

 

Mon, 04/08/2013 - 23:42 | 3425031 knukles
knukles's picture

A multitude of price supports and subsidies to concoct a less energy efficient fuel
Fucking Bingo

And you wonder why we are where we are....

Mon, 04/08/2013 - 23:25 | 3424987 yogibear
yogibear's picture

Plenty of them in the Government.

Tue, 04/09/2013 - 10:17 | 3426250 post turtle saver
post turtle saver's picture

I doubt anyone here eats switchgrass.

Mon, 04/08/2013 - 22:15 | 3424730 NoDebt
NoDebt's picture

Can we dispense with the idiotic idea of burning food for fuel already?  It was stupid when it was set up and almost comically morose now.  Let's make food cost more so that we can also make gasoline cost more.  Genius.  This is a pure dead-weight loss for the entire economy (except, as usual, for a select few who make out like bandits because they're plugged into the government machinery and the RIN market).

Yes, I'm aware that the corn used for making Ethanol is not human edible corn like you buy at the local farmer's market.  It's silage corn but that makes no damned difference- it's still an input to vast parts of the overall food industry. 

This whole program was set up as a way of being more energy-independent.  So let's not get on the "global warming" rant here- this has NOTHING to do with it.  This is purely a substitution of one energy source for another.  Have advances in NG and shale exploration not spanked this stupid idea's ass red enough yet?

Oh, I'm sorry, I forgot it's gotta be RENEWABLE energy.  My bad.  Nevermind.  Great program.  Keep it up.  Maybe we should eat our own children while we're at it.  They're renewable too.

Mon, 04/08/2013 - 22:25 | 3424758 otto skorzeny
otto skorzeny's picture

next up-we'll  power our vehicles w/ NG and in the meantime drive the cost of heating homes with it through the fucking roof. also-sugar cane is much higher in energy than corn for ethanol and we could get huge amounts  from Cuba but that pissy embargo we have prevents it.

Mon, 04/08/2013 - 22:29 | 3424786 Momauguin Joe
Momauguin Joe's picture

Time to reconsider the need for "our vehicles".

Tue, 04/09/2013 - 02:44 | 3425263 zhandax
zhandax's picture

also-sugar cane is much higher in energy than corn for ethanol and we could get huge amounts from Cuba

We could get huge amounts from Mississippi if fedgov weren't paying them so much to eat, drink, and reproduce.

Tue, 04/09/2013 - 07:04 | 3425437 Bicycle Repairman
Bicycle Repairman's picture

Last I heard we won't let Brazil sell us cane-sugar ethanol, either.  Guess they are on some double secret shit list.

Tue, 04/09/2013 - 08:43 | 3425740 Flakmeister
Flakmeister's picture

You are always a day late and a dollar short:

http://www.businessweek.com/news/2011-11-22/brazil-to-become-net-importer-of-u-s-ethanol-czarnikow-says.html

Clearly the 2012 drought did change things but once again you seem to be full of shit...

http://www.bloomberg.com/news/2012-07-30/u-s-exports-no-ethanol-to-brazil-in-may-as-imports-rise.html

You are truly a font of disinformation...

Tue, 04/09/2013 - 10:47 | 3426404 Bicycle Repairman
Bicycle Repairman's picture

Wow.  Conditions changed?  The point is that imports of Brazilian ethanol, when conditions have warranted it, have been unwelcome in the USA.  No where in your cited articles is that point even raised.

Keep trifling, fucktard.  You fool no one.

Tue, 04/09/2013 - 10:48 | 3426410 Flakmeister
Flakmeister's picture

Keep making shit up, you are on a roll, why stop now?

Tue, 04/09/2013 - 10:56 | 3426449 Bicycle Repairman
Bicycle Repairman's picture

Being a useful idiot is no way to go through life.  I suppose you get paid though.

Tue, 04/09/2013 - 11:51 | 3426741 Flakmeister
Flakmeister's picture

Yawn....

I suppose one day I will tire of pwn'n you on an almost daily basis...

Tue, 04/09/2013 - 11:56 | 3426776 Bicycle Repairman
Bicycle Repairman's picture

Big picture.  You came here hoping to turn ZH into a subset of the oildrum.  How's that working out? 

Ownership?  When anybody pays any attention to your disingenuous fluff it garners more down arrows than up.  If you weren't constantly stalking me, I'd ignore you, too.

You've got nothing, flakey.

Mon, 04/08/2013 - 22:32 | 3424787 Momauguin Joe
Momauguin Joe's picture

..

Mon, 04/08/2013 - 22:33 | 3424793 The Second Rule
The Second Rule's picture

Want to hear something even more  stupid. They're flaring millions of cubic feet of nattie right into the atmostphere in the South Dakota Bakken fields. Poof.

Mon, 04/08/2013 - 23:42 | 3425033 knukles
knukles's picture

Clearly visible on satellites.

Tue, 04/09/2013 - 11:52 | 3426748 Flakmeister
Flakmeister's picture

That's the free market at work...

Mon, 04/08/2013 - 22:31 | 3424792 RafterManFMJ
RafterManFMJ's picture

I love the Ethanol program; it would be hard to find a program that combines so much damage into one synergistic inferno!

1) Drives up the cost of food inputs, and meat. So JQ Hapless spends more on food.

2) Lowers the avg. mileage per gallon by lowering the energy in Ethanol contaminated gas. So JQ Hapless must spend more to go a given distance.

3) Adds complication to refining and distribution, further increasing the cost per gallon, driving up JQ Hapless' expenses.

4) Requires massive subsidies which the nation, bankrupt, can hardly afford.

5) Uses massive amounts of groundwater that is not/cannot be replenished. Aquifer, goodbye.

6) Damages vehicles, destroys chainsaws and other small engines.

It may be the most Evil, incompetent and criminally Demonic program in the History of the Republic - and that's saying something.  I marvel at it, and I gape with wonder.

Mon, 04/08/2013 - 22:48 | 3424859 The Second Rule
The Second Rule's picture

Well, not to keep harping on the same string but...EROEI bitches.

Ethanol is AT BEST a net energy neutral technology. Hell it may even be slightly net negative once you factor in all the energy inputs and outputs. The bottom line is there is no logic in subsidizing this apostasy. There is no net gain in energy for the US. There is no net benefit for the US (except for a few corporate megafarms and the ag lobby).

Mon, 04/08/2013 - 23:44 | 3425037 knukles
knukles's picture

AND CAMPAIGN CONTRIBUTIONS

Tue, 04/09/2013 - 00:02 | 3425090 The Second Rule
The Second Rule's picture

Right. Well, that's your ag lobby in action. It's all about the money. That's the only reason this bullshit continues.

Tue, 04/09/2013 - 00:47 | 3425169 Anusocracy
Anusocracy's picture

"It may be the most Evil, incompetent and criminally Demonic program in the History of the Republic - and that's saying something.  I marvel at it, and I gape with wonder."

I would give that award to the banning of DDT.

Tue, 04/09/2013 - 10:41 | 3426377 RafterManFMJ
RafterManFMJ's picture

Not really a program more of a policy.  Simple math, really; Do I as a good progressive prefer pretty birds or 500 million dead people with black/brown/yellow skin? And you see the choice that was made.

DDT cannot be hard to manufacture so I'm disappointed no nation in Africa doesn't simply make it, use it, sell it, and crucify any foreigner who crosses their frontier and opens their pie hole about it.

And I do literally mean crucify. Nail them to a cross and let 'em die slow.

Mon, 04/08/2013 - 22:14 | 3424732 The Second Rule
The Second Rule's picture

I would say something about peak oil, but really what's the point anymore. 1/3 get it. 1/3 don't. And 1/3 think the earth has a caramel center made out of oil that will last forever (the abiotic nuts).

Mon, 04/08/2013 - 22:35 | 3424806 RafterManFMJ
RafterManFMJ's picture

Nah, the CIA, the Greys and remnants from Nazi Germany are still struggling to control the center of the Earth.  If there is any candy there, it'd be good German chocolate.

Mon, 04/08/2013 - 22:39 | 3424827 The Second Rule
The Second Rule's picture

The Nazis...aren't they the ones with the flying saucer base in Antarctica?

Mon, 04/08/2013 - 23:03 | 3424912 RafterManFMJ
RafterManFMJ's picture

Exactly.  That's where the entrance to the center of the Earth is;  Amazing how they continue the fight after so many years.

Mon, 04/08/2013 - 23:18 | 3424967 Teamtc321
Teamtc321's picture

"should the RINs rise to $3, then that will mean a 10% rise in the price at the pump implying a 0.9% drag of GDP growth - something our Congress won't accept."

 

Ya right, our admin will allow the price to sky rocket, then demand congress do their home work. Then just slide another huge tax in its place to keep the fuel price elevated, while increasing everyone's "FAIR fucking SHARE".  

 

I see the banksters at GS is doing more of Gods work.

 

Forward Bitcheez.

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