The ethanol content will have to go up due to the guidelines of the law. Or the law needs to be scrapped.
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There are several serious macroeconomic problems that need to be addressed before the renewable fuels market becomes even close to a long–term, viable solution.
Now, I know most of you already know that the government really needs to get their act together on many things, but it is especially true when it comes to ethanol mandates.
The government is more than a year behind on setting the required number of RFS gallons that are to be blended. Industry has no idea what the set mandates were supposed to be in 2014, let alone 2015. There are “proposed solutions” and numbers from when the previous RFS was set, but nothing concrete. This causes all sorts of problems for the industry.
First off, without knowing the required blending requirements, both producers and refiners are scratching their heads on total ethanol required for compliance. Second, as made public by the Energy Information Administration (EIA) recently, the secondary market for credits created by producing ethanol are becoming incredibly volatile. The Renewable Identification Number, or RIN for short, is a unique identifier created through the production of each gallon of ethanol.
The RIN provides the verification that the company is blending the correct percentage of ethanol. If the company has already met blending requirements, the RIN can be sold in a secondary market to another company that needs it to meet their own yearly requirement. Therefore the only source of demand for RINs are producers and importers of transportation fuels that need to meet their obligations to use biofuels. To show the EPA that they have met the requirement, the companies give the EPA the RINs that they have accumulated. If demand for RINs is expected to increase in the future, then the current price of RINs rises as buyers try to buy inexpensive RINs today and bank them for use tomorrow. The price of RINs ran up in January from refiners banking RINs in expectation of a mandate. However, no mandate has yet been received.
Big Oil Hates Ethanol