A detailed statistical analysis released yesterday by the Renewable Fuel Association shows that erratic surge in prices for Renewable Identification Number credits in 2013 did not impact retail gasoline prices. This study, which was conducted by Informa Economics, demonstrates clearly how yet another argument used by those who oppose the Renewable Fuel Standard proves inaccurate when fully examined.
“Changes in prices of renewable identification numbers did not cause changes in retail gasoline prices in 2013,” according to a 7-page report summarizing the analysis. “Retail gasoline prices were driven primarily by movements in crude oil prices and secondarily by changes in the spread between domestic and international crude oil prices and the level of vehicle miles driven in the U.S., which varies seasonally.”
“We fully support the findings of this study and urge federal regulators to take this information into consideration when considering reductions to the RFS renewable volume obligations in 2014 proposed by the Environmental Protection Agency,” said National Corn Growers Association Ethanol Committee Chair Jeff Sandborn. “As NCGA and the ethanol industry delve further into the arguments used to support this proposal, we find time and time again that the claims upon which they are based prove false. The RFS plays an important and effective role in improving our environment while increasing national energy and economic security. It would be disastrous to move away from this important regulation because of a failure to see through fallacious claims.”
A RIN is a unique “serial number” assigned under the RFS regulation to record the production of one gallon of ethanol. The RIN is attached to the gallon of ethanol at the point of production and generally remains affixed to the gallon throughout the supply chain. Thus, when a blender or refiner purchases a gallon of ethanol, it also receives the attached RIN at no additional cost. The RIN is separated from the gallon when the ethanol is physically blended with gasoline by an obligated refiner or blender. At this point, the RIN becomes an instrument for demonstrating compliance with annual RFS blending requirements.
The analysis uses accepted and proven statistical methods to examine whether any type of causal relationship existed between RIN prices and retail gas prices in 2013. The results of the statistical tests revealed no relationship.
“Although retail gasoline prices and RIN prices both increased in early 2013 and remained elevated (though volatile) during the middle of the year, this was mainly coincidental, and upon closer examination it can be determined that these changes generally occurred for different reasons,” the report concluded. “In fact, the increase in gasoline price early in the year actually pre-dated the increase in RIN prices.”
The Informa report is available here.