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Biofuel Credit Shortage to Boost U.S. Gasoline Exports, IEA Says

Biofuel Credit Shortage to Boost U.S. Gasoline Exports, IEA Says

A shortage of biofuel credits needed for gasoline sales in the U.S. may lead to an increase in exports of the fuel from America in 2014, according to the International Energy Agency.

The U.S. Environmental Protection Agency, or EPA, earlier this month maintained its target requiring 16.55 billion gallons, or 1.1 million barrels a day, of biofuels be blended into the country’s gasoline and diesel supplies this year. This led to concerns as to whether the domestic gasoline market can absorb this volume of biofuel and may have hit the so-called “blend wall,” the IEA said today.

Refiners can offset this requirement by buying credits, known as Renewable Identification Numbers, or RINs. The price has increased more than 10 times to a record $1.43 per RIN last month as traders bought the credits amid uncertainty over how much biofuel blending will be required this year and next, according to the agency.

“Some industry participants warn that a shortage of RINs will force firms to reduce the gasoline volumes offered in the U.S. market in 2014 and after,” the Paris-based IEA said in its monthly Oil Market Report. “Instead, gasoline production could be exported as only fuel supplied to the U.S. market require a RIN certificate.”

The blending requirement has had an “uneven impact for U.S. refiners,” the agency said. Valero Energy Corp. has been the hardest hit by the rise in RINs prices and is having to spend as much as $800 million this year on the credits while Exxon Mobil Corp. said it has sufficient blending capacity to keep RINs cost at a minimum, according to the IEA.

Copyright 2013 Bloomberg

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Volume 18, Issue 3


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