The federal Renewable Fuel Standard (RFS) requires gasoline and diesel refiners, blenders and importers to purchase and use an ever increasing number of renewable fuel credits (known as RINs) generated by renewable fuel producers to represent volumes of specific types of renewable fuel. RIN prices have increased by more than 2,100% since the end of 2012 to $1.18 for corn-ethanol RINs, representing a cost of approximately $0.11 for every gallon of gasoline and diesel produced at present RIN prices. This year, importers and refiners of gasoline and diesel will be required to purchase and retire 13.8 billion corn-ethanol RINs, representing approximately 85% of the overall number of RINs that these parties must purchase.
In past years, corn-ethanol RINs were very inexpensive and traded at less than $0.01 per RIN. Corn-ethanol RINs remained inexpensive due to relatively low production costs and ease of blending ethanol into gasoline. Prices for these RINs steadily skyrocketed in the first quarter of 2013, however, to slightly more than $1.00 per RIN. Since March prices dropped slightly and traded generally between $0.60 and $0.90 per RIN, but prices have rallied in July to $1.18 per RIN.
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