Biodiesel RIN values continue to decline

A 24-cent drop in biodiesel RIN values has been seen in the past month and a half
By Ron Kotrba | June 20, 2012

2012 biodiesel RIN prices have been on the decline for the past month and a half. After steadying at about $1.45 for several months, beginning in May—just after the Green Diesel NOV, followed by a series of events including the OceanConnect lawsuit against U.S. EPA for its handling of the RIN scandals, the FBI raid on Cima Green and subsequent subpoenas issued seeking information on Indiana-based eBiofuels—prices began to slip.

On May 1, according to Atlas Commodities, 2012 biodiesel RIN bids were at $1.40 and offers stood at $1.44. Yesterday, June 19, bids were at $1.18 and offers at $1.20. That's about a 17 percent drop. 

My initial thought on why this rather sudden price drop is obvious: given EPA’s “buyer beware” stance on purchasing RINs (as of now anyway, perhaps it will change as a result of Congress’ investigation) and the yet unknowns regarding how many more invalid RINs are still on the marketplace, obligated parties are reluctant to purchase right now. When goods are not being bought, prices go down. It’s simple economics.

Consider where the industry is today: mired in the aftermath of a devastating RIN scandal and on the verge of market stability as the powerful, new RIN Integrity Network by Genscape, now merged with Lee Enterprises’ RIN 9000 program, is getting off the ground. We’re in limbo, essentially.

“I think the initial decline in RIN prices over the past few months was pretty foreseeable,” says Wayne Lee, CEO of Lee Enterprises, “given the publicity surrounding the couple of RIN fraud cases and the current hesitancy of obligated parties to purchase RINs. I think programs such as Genscape’s RIN Integrity Network will be quite instrumental in helping reduce the fear of buying RINs. My opinion is that we will see a pretty significant increase in RIN prices over the next six to eight months as obligated parties begin to focus on their 2012 RFS2 obligations and even begin vetting biodiesel plants on their own. I know that we are getting more calls than ever about RINs and vetting.”

Jess Hewitt of Gulf Hydrocarbon, and Lee Enterprises' RIN expert consultant, says he thinks the drop in RIN values has more to do with the price spread between diesel and biodiesel. He says the price difference right now is about $1.50. When the spread is higher, RIN prices go up. When the spread is lower, RIN prices go down. Obligated parties weigh out the most cost-efficient approach to meeting their obligations and sometimes that means buying wet gallons instead of credits. 

I want to hear from my biodiesel readers, what are your thoughts on this?