Wednesday, July 7, 2010

Biodiesel RIN markets

I've been spending some time with RIN markets over the last year. I've argued that what is keeping biodiesel production down in the first half of the year was in part the uncertainty surrounding the credit, not necessary if the credit was in place or not. In biodiesel, the mandate appears to be fairly binding, and therefore determining quantities for the year. Blenders, however, may be taking a wait and see approach with respect to biodiesel blending, not wanting to blend now, with a higher RIN price embedded in the fuel purchase price only to see congress pass (and retroactively) a credit extension. RIN prices have increased substantially as the probability of an extension fades.

I also have some questions as to why we don't see a greater 2009 to 2010 vintage ethanol RIN wedge, but as we approach a discretionary blending volume near 20% of next years mandate, low and roughly equivalent values between the two vintages of ethanol RINs probably makes sense.

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