Hitting the “blend wall”: Renewable fuel credit prices hit an all-time high

posted at 7:21 pm on July 17, 2013 by Erika Johnsen

The Renewable Fuels Standard — that oh so ingenious method of creating a fake market for a not-green, not-clean, food-price-spiking, special-interest-serving and overall terrible product — requires that the nation’s refiners blend an ever-increasing volume of specified and so-called biofuels into the fuel supply. Refiners, however, are insisting that we’re now getting to a point at which mixing the required volumes will exceed the 10 percent ethanol threshold they find acceptable for use in cars and trucks, a.k.a. hitting the “blend wall.” Refiners that don’t manage to achieve the mandated volume of biofuels are required to purchase credits (RINs), and heightened demand for the credits is steadily pushing up their prices as the “blend wall” gets closer:

The price of US ethanol credits has notched a new high as oil companies scramble to comply with a biofuels mandate that Washington has given no hint of easing.

The small, illiquid market has surged more than 2,300 per cent this year as petrol refiners and importers fear scarce future stocks of the credits.

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. …

The US Environmental Protection Agency, which administers the mandate, has said it plans to announce targets for ethanol consumption this summer.

And you can count on the EPA planning to hike up the mandate still further — seeing as how they’ve been known to not only model some of those requirements after their completely fanciful projection models for cellulosic biofuels that aren’t actually commercially available in the required amounts, but to then try to penalize companies for not complying. …And then raise those requirements for said non-existent biofuels, again. Yes, this is real life.

And while they definitely do not constitute a complete reason for the rise in gasoline prices, these mandated credits are definitely a factor in prices at the pump.

A leading U.S. oil executive urged legislators on Tuesday to relax a requirement to use renewable fuel in gasoline, blaming an “out of control” market in biofuel credits known as RINs for adding to fuel costs in a recent run-up in gasoline prices.

At a Senate Energy Committee hearing, lawmakers sought answers for why a surge in domestic crude oil production to the highest level in over two decades had failed to bring down fuel prices. Average U.S. gasoline rates jumped 15 cents over the past week to $3.64 a gallon on Monday, data showed.

Oil refiner Valero Energy Corp Chief Executive Bill Klesse said the government’s renewable fuel mandate is affecting prices in the refined fuel market, repeating a long-standing source of aggravation for the energy industry. …

“The thing the government can do is to get a hold of RINs,” Klesse said. “RINs are out of control.”


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That stuff has screwed up all my lawn machines.

faraway on July 17, 2013 at 7:22 PM

Let’s face it the government is completely out of control and nuts.

tim c on July 17, 2013 at 7:26 PM

Screw that…have you *seen* the prices for moonshine these days?

:heart-ache:

BlaxPac on July 17, 2013 at 7:28 PM

Under my administration, energy costs will skyrocket…..

GarandFan on July 17, 2013 at 7:54 PM

We’re not falling for a corncob in the gas tank?

Chris of Rights on July 17, 2013 at 7:56 PM

The only solution I’ve found to counter this BS, killer of engines is to go “Pure Gas”. It costs as much as high octane Premium..but I figure my cost to replace my motor is about 7K!

On a recent trip of 1500 miles…I found Pure gas at just about every pit stop along the Interstate I made…maybe a mile or two from the “main” strips of Wendy’s McDonald’s, Hardy’s and slop joints along the way. Matter of fact…there’s an app that will find them for you and navigate to them for you too. All within two to four miles of your current location.

Twana on July 17, 2013 at 7:56 PM

The only solution I’ve found to counter this BS, killer of engines is to go “Pure Gas”. It costs as much as high octane Premium..but I figure my cost to replace my motor is about 7K!

On a recent trip of 1500 miles…I found Pure gas at just about every pit stop along the Interstate I made…maybe a mile or two from the “main” strips of Wendy’s McDonald’s, Hardy’s and slop joints along the way. Matter of fact…there’s an app that will find them for you and navigate to them for you too. All within two to four miles of your current location.

Twana on July 17, 2013 at 7:56 PM

Pure-gas.org

The problem with finding pure gasoline is not on the highways, it’s in the cities where the damn liberals don’t allow it.

slickwillie2001 on July 17, 2013 at 8:05 PM

About that picture:

Why would someone think that the head of Afghan Hound looks good as a gas cap?

Ladysmith CulchaVulcha on July 17, 2013 at 8:06 PM

One war, one hurricane away from devastating prices.

And even if that happens the gestapo will relax 0 regs.

I hope it does happen, and soon. Shock the masses of lofo’s with $8/gal.
Maybe they’ll wake up.

Or a drought. $5/ ear corn.

Great read, Erika.

wolly4321 on July 17, 2013 at 8:50 PM

Meanwhile, while barking about peanuts….Bernahke keeps digitizing trillions all the while pouring it Obama supporters via the stock market…….and Hot Air says the Zimmerman episode is just to keep the attention off the main black problem……while the whites bark about peanuts

sbark on July 17, 2013 at 9:13 PM

It’s long past time to say NO to these unelected dimbulbs. If it results in closed refineries, so much the better. Even LIVs will wonder why there is no gas.

Seriously, the word “mandate” should NEVER be used in this Republic….NEVER!!!

We all have to start saying NO.

Some folks actually pledged their lives, fortunes and sacred honor. What do we do? Whine?

FOWG1 on July 17, 2013 at 9:40 PM

We need all the sources of liquid motor fuels we can get. Ethanol has a place there, I think.

What we are seeing right now is blenders putting a run on renewable fuel credits, in essence, their “get out of jail free” card for failing to meet the requirements of the law. In an economically rational environment, this is an expected outcome, so I don’t know what the hand wringing is all about. The credits, a mechanism added to the RFS law designed to be a means to ease lenders into using the law’s required levels of biofuels, have become the industry’s method to stave them off. The result has been costly delay.

We might all be better off if we encouraged the development of blender pumps that would allow people to choose their own level of biofuel use, from 0% to 85%, instead of relying on gasoline sellers to sell a product that displaces their own in the market. Why should gasoline retailers be the gateway for a competitor’s product? Shouldn’t consumers decide that? But that’s the deal that got the original RFS passed–gasoline retailers maintain functional control over how much RFS actually gets consumed, (and complain about it the whole time.) The US is not Brazil, their capacity for oil production was very low, and their commitment to becoming energy independent required the development of fossil fuel alternatives. The US has plenty of oil capacity, so petro interesst were bound to view ethanol as a threat, despite our heavy reliance on foreign sources of oil.

As an economic matter, ethanol production has contributed significantly to national GDP, particularly in rural areas, raising incomes, tax bases, and reducing a costly trade imbalance on fuel. I have never understood the knee-jerk response from some conservatives. These are things we want.

Caustic Conservative on July 17, 2013 at 9:46 PM

I see the development of the Bakken fields (oil shale) as a good development for energy policy and particularly those states that are able to bring those resources to market. North Dakota is growing at an unprecedented rate while providing the country with a needed commodity. I say that’s a good thing.

Ethanol does the same thing in other states. That is a good thing also.

I am not a hypocrite when it comes to energy. We need as much of it as we can get, as cheaply as we can afford to get it. It is the mother’s milk of any successful economy.

Caustic Conservative on July 17, 2013 at 9:52 PM

Why not convert natural gas to methanol and blend with that? Methanol is a hell of a lot cheaper.

elowe on July 17, 2013 at 11:15 PM

Yeah, this blended gas has totally F’d up my lawn equipment. I spent 30 minutes cleaning out gummed up crap in my gas trimmer’s carburetor the last time I used it. And even then it took about 20 starts before it finally was able to run on it’s own. It’s ridiculous that I have to go to the hardware store just to buy a special ethanol free fuel.

Heftyjo on July 18, 2013 at 10:44 AM