After years of volatile and high Renewable Identification Number (RIN) prices under the federal Renewable Fuel Standard (RFS), our nation’s independent refiners repeatedly reported spending more on these credits than on all other annual operational expense combined.
On the heels of the Environmental Protection Agency (EPA)’s misguided decision to increase the program’s proposed biofuel blending levels for 2022, independent refiners will continue to suffer from the insurmountable costs of skyrocketing RINs bills.
Contrary to what some might have you believe, higher prices for these credits – which are used to demonstrate compliance under the RFS – do not provide any tangible benefit to the ethanol industry or farmers. In fact, it has been proven that high RIN prices do not lead to higher levels of ethanol blending. Instead, major retailers and Big Oil producers are the ones who continue to profit from higher RINs prices. Just take a look at their recent earnings calls, as well as other communications with investors.
In the last six months alone, Marathon, Philips 66, Casey’s, and Murphy’s USA have all stated that RINs sales contribute to their profit margin or are part of their profit plans moving forward:
- Marathon: “… And then there's some tailwinds. We've got a bigger contribution from RIN pricing, a bigger contribution from RD prices.” – Ray Brooks, Executive Vice President of Refining
- Philips 66 Second Quarter 2022 Earnings Call: “If you take a look at the oil, the heating oil spread, it's the slowest in the past 1.5 years, in large part because heating oil has risen much quicker than the feedstock into the plant. That's a benefit to us. And the RINs, as you know, are very highly priced as well.” – Brian Mandell, Executive Vice President, Marketing & Commercial
- Casey’s Fourth Quarter 2022 Earnings Call: “Same-store gallons sold were up 1.5% for the quarter, and up 8% on a two-year stacked basis. Fuel gross profit was up 27% due to an increase of 3.2 cents per gallon in fuel margin coupled with a 16% increase in total fuel gallons sold, despite a significant increase in fuel cost experienced at the end of the quarter. The Company sold $1.1 million in renewable fuel credits (RINs) in the fourth quarter, while no RINs were sold in the same period last year.” - Casey’s Press Release
- Murphy’s USA Second Quarter 2022 Earnings Call: “Total fuel contribution (retail fuel margin plus product supply and wholesale ("PS&W") results including RINs) for Q2 2022 was 34.9 cpg, compared to 28.2 cpg in Q2 2021” – Murphy’s USA Press Release
The RFS was a well-intended program aimed at increasing the use of renewable fuels in our nation’s transportation fuel – it was never meant to line the pockets of the largest multi-national oil conglomerates and convenience store chains. Unfortunately, the broken RIN system today is enabling these entities to enrich themselves on higher RIN prices, while putting independent refiners closer to the brink of closure.
Congress should work with the Biden administration to stabilize RIN costs and create a commonsense solution that reduces the unpredictable cost of these compliance credits – helping to protect America’s refining capacity, save tens of thousands of union jobs, and lower gas prices – all while supporting the objectives of the RFS.
