The Retailer’s Friend: The RIN
Posted on 07/01/2021
Recent fuel industry news has included a heavy rotation of sob stories from small “merchant” refiners and larger oil companies that own larger, outdated, inefficient refineries, bleating about their woes being caused by the Renewable Fuels Standard, and more specifically, high RIN prices. As a fuel retailer, you’ve no doubt heard some of this whining and figured somehow, like everything else refiners complain about, these RINs are going to cost you money, and you should probably be against them.
As most of you know, a RIN is a renewable identification number which serves as “proof of purchase” for refiners when they prove to EPA they purchased and blended the renewable fuels they were supposed to blend by law. Every gallon of ethanol produced has a RIN attached to it at no cost, and whoever blends it with gas gets to keep it. If you’re a refiner, you get all the RINs attached to gallons of E10 or any other blend you sell, and the only reason you’d have to buy a RIN is if you sold a lot of clear gallons. And if you’re a retailer, you know refiners charge more for the clear gallons because the refiner has to buy RINs – and yet those same refiners seem to leave out that extra margin they’re charging you when they go to the media, or Congress, or the White House, whining about how much RINs cost. It’s a little bit like complaining about gas taxes that are included in the price of gas at the pump, collecting the money from your customers, and then asking Congress and the President to let you keep the money.
In short, those RINs don’t cost refiners or you anything out of pocket, and not only should you not be against RINs, you should be completely in favor of them and finding out ways to get more of them, because RINs are your friend. The ability for independent retailers to sell higher ethanol blends at lower prices while still improving profit margins by selling the RINs they earn from blending, gives independent marketers something they’ve never had before: an advantage over Big Oil.
If Joe’s Corner Convenience Store and Exxon/Mobil c-store each get 8,000 gallons of E10, they each get 800 RINs. Exxon/Mobil has to turn theirs in to EPA to prove compliance with the RFS. Joe doesn’t refine products that harm the environment, so he can sell any RINs he gets. As I’m writing this on the last day of June, Joe’s 800 RINs would be worth more than $1200 bucks, and even if Joe bought his E10 already blended and didn’t get the RINs (although the price of E10 almost always is reduced to reflect some portion of the RIN’s value) if he added enough ethanol to make E15, the RINs he got for the extra 5% ethanol would be worth $600, or about 7.5 cents per gallon. He could price his E15 5 cents less than the oil company store’s E10 and keep an extra 2.5 cents margin. Or sell the 88 octane fuel at the same price as 87 octane E10 and put $600 toward a pump upgrade to sell E85 and other blends to get even more RINs. Or just keep the money. Either way, until Exxon/Mobil sells more renewables than the RFS requires, Joe has the advantage.
That’s why refiner hates RINs, and retailers should love them. Being unable to compete with small retailers is not a position familiar to Big Oil. Get the most out of it while you can.