Surge in Demand for U.S. Renewable Fuel Credits
Renewable fuel credits in the U.S. reached multi-month highs on Friday due to increased demand from refiners meeting compliance mandates and a spike in soyoil prices. This development surprised traders who anticipated a potential market dip following Donald Trump’s reelection.
Impact on Biofuel Producers and Petroleum Refiners
The rise in prices for Renewable Identification Numbers (RINs) is favorable for U.S. biofuel producers, as it helps offset high production costs. However, it presents a challenge for petroleum refiners whose profit margins have significantly declined this year due to oversupply and reduced fuel demand.
Price Surge of D4 and D6 RINs
On Friday, the prices for D4 RINs, designated for biomass-based diesel producers, and D6 RINs, used by ethanol suppliers, climbed to 79 cents each. According to LSEG data, these are the highest prices observed since January.
Mandated U.S. Fuel Blending Requirements
The U.S. government mandates the inclusion of low-carbon fuels in the nation’s fuel mix and issues RINs to compliant companies. Refiners unable to meet their blending targets must purchase RINs or face penalties.
Speculation Following Trump’s Reelection
Donald Trump’s reelection sparked speculation that smaller refineries might receive easier exemptions from their RIN obligations. Tom Kloza, an analyst at OPIS, noted that this expectation influenced market behavior. However, Trump has yet to announce any plans regarding these exemptions.
Uncertainty Drives Purchases Among Refiners
“There’s uncertainty around whether Trump will reintroduce widespread small refinery exemptions, so some small refiners may be buying now to avoid being caught short,” said Alex Hodes, an analyst at energy brokerage StoneX.
Anticipated Market Changes for 2025
Industry experts predict that fewer RINs will be available next year due to more stringent government mandates and ongoing weak fuel demand, which could limit renewable fuel blending. Will Faulkner, founder of Carbon Acumen, highlighted this potential shortage.
Impact of Soybean Oil Prices on RINs
Soybean oil prices have surged, fueled by expectations that Trump could implement tariffs on biofuel feedstock imports. Paul Niznik, director of energy at Capstone, explained that higher feedstock prices squeeze producer margins, prompting them to raise RIN prices.