"The federal government revised quotas for renewable fuels yesterday, as demand for gasoline and production of “next-generation sources” has been short of expectations. The Environmental Protection Agency (EPA) gave refiners an additional 4 months to reach the expected 16.55 billion gallons of renewable fuel in 2013. The EPA also suggested it will reduce the 18.15 billion gallon mandate for 2014, which was one of the main reasons for the increase ethanol credit prices (which refiners can buy to comply) earlier. Under the Renewable Fuel Standard (RFS) passed by Congress in 2007, the government mandated refiners to use a certain amount of renewable fuels each year, arguing it would increase domestic production and cut greenhouse-gas emissions by reducing use of gasoline or diesel. However, refiners claimed that declining demand for gasoline could translate into blending more than 10 percent of ethanol next year, which is not supported by all engines and lacks support from the general public. The EPA announced they will lower next year’s quota for the expected 13.2 billion gallons of ethanol that could fit within the 10 percent “blendwall”, on top of additional biodiesel or cellulosic fuels that would qualify as well. Because the 2013 quotas were issued late in the year, EPA also prolonged the deadline to comply through June 30th, 2014, (adding 4 additional months). The EPA also cut its 2013 requirement for use of cellulosic biofuels to 6 million gallons from a proposed 14 million, saying biofuel supply is limited despite the increase in production so far in 2013. If refiners don’t produce or buy enough renewable fuel, they can buy credits for it. These credits are called Renewable Identification Numbers (RINs). RINs had surged earlier this year following concerns there would not be adequate gasoline demand to mix in a safe level of ethanol and other renewable fuels in 2013 and 2014. As seen on the graph below, after the announcement, corn-based ethanol RINs dropped 13% to 90 cents, the lowest since June 18."
Message Posted: Aug 8, 2013 10:49:19 PM
[Edited by: Hannie59 at 8/8/2013 10:52:17 PM EST]