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RENEWABLE IDENTIFICATION NUMBERS (RINS) TRADING UNDER THE RENEWABLE FUELS PROGRAM: UNINTENDED CONSEQUENCES FOR SMALL RETAILERS

August 17, 2016

Small fuel retailers are losing market share because of the complicated and expensive renewable fuels mandate trading system

The federal government has mandated renewable fuels be blended into the nation’s transportation fuel supply. The Environmental Protection Agency created a complicated tracking system assigning Renewable Identification Numbers (RINs) to each gallon of biofuels. The RIN’s separate from the gallon of fuel once it is blended with the owner of the RIN allowed to sell his credits to those unable to meet blending requirements. More RIN’s are sold than the actual amount of renewable fuel produced.

Only larger retailers have the financial resources purchase  bulk  quantities  of  gasoline  and  diesel  blendstocks  as  well  as  ethanol  and  other biofuels and to participate in RINs trading; small retailers have neither the capital nor the market leverage to take positions in RINs trading.  As a result, large companies have been gaming the system, increasing their market share by taking ownership of fuels at the blending point and acquiring associated RINs they can sell at a profit, thereby generating additional revenues allowing them to undercut their smaller competitors’ retail prices for fuel.

Author
Bernard L. Weinstein is Associate Director of the Maguire Energy Institute and an Adjunct Professor of Business Economics in the Cox School of Business at Southern Methodist University in Dallas.
bweinstein@cox.smu.edu