LyondellBasell US Q1 RIN costs more than double over Q4

26 April 2013 21:58  [Source: ICIS news]

HOUSTON (ICIS)--LyondellBasell's costs for renewable identification numbers (RIN) more than doubled to $25m (€19bn) in the first quarter of 2013 from less than $10m in the fourth quarter of 2012, the company's chief executive said on Friday.

RINs are renewable fuel credits that refiners and blenders must obtain as proof that they are using certain volumes of biofuels.

Every gallon of biofuel manufactured is assigned a RIN, and refiners obtain those numbers on purchase of biofuel supplies. After purchase, RINs can be traded on an EPA-provided website.

To comply with the EPA mandate, refiners can either buy ethanol or purchase RINs on the trading site.

LyondellBasell's higher RIN costs come as prices had risen by more than $1/credit in March from about 7 cents/credit earlier in the year.

"We expect that increased costs associated with RINs will ultimately be passed through to the market, but it is difficult to predict exactly when," said Jim Gallogly, LyondellBasell CEO.

He made his comments during an earnings conference call.

The increase in RIN prices is tied to a 10% ethanol blending wall and to US regulations that require a total amount of ethanol to be blended into gasoline, regardless of the cap.

The blending cap is somewhat nominal because US regulations allow ethanol blends of up to 15% for automobiles made in 2001 or later.

Refiners, though, are reluctant to blend more than 10% of ethanol into their fuel because of concerns that the higher blend could damage automobiles and make the companies vulnerable to lawsuits.

In 2012, refiners were able to add enough ethanol into their fuel without breaking the 10% cap.

For 2013, however, the blending requirement rose to 14bn gal of ethanol. If refiners want to stay within the 10% blending cap, they will have to produce more gasoline to meet the higher blending requirement.

US gasoline demand, though, will likely be flat in 2013.

Since refiners cannot blend more ethanol into their fuel, they are buying RINS in order to meet the US blending requirement of 14bn gal of ethanol.

As a result, RIN prices have increased.

Additional reporting by Bobbie Clark

($1 = €0.77)

By: Al Greenwood
+1 713 525 2645

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