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New Statistical Analysis: Retail Gas Prices Unaffected by Renewable Fuel Standard RIN Credits

May 20, 2015


WASHINGTON Retail gasoline prices from 2013 through the first quarter of 2015 were unaffected by prices for RIN credits (Renewable Identification Numbers) that are used to demonstrate compliance with the Renewable Fuel Standard (RFS), according to a new detailed statistical analysis conducted by Informa Economics, Inc. The new study again disproves the faulty assertion by oil industry trade groups that RINs somehow negatively influence consumer gas prices. The study found that Changes in prices of renewable identification numbers (RINs) did not cause changes in retail gasoline prices from 2013 through the first quarter of 2015. Not surprisingly, the analysis shows that a majority of gasoline price movements can be explained by crude oil prices. In fact, the study found that gas prices in recent years have been driven almost entirely by crude oil prices and vehicle miles traveled. The new Informa analysis supports the findings of an April study by former White House economic advisor James Stock, who concluded that there is negligible estimated effect of RIN prices on pump E10 prices. In essence, a RIN credit is a unique serial number used under the RFS regulation to commemorate the production of one gallon of renewable fuel (like ethanol). The RIN credit is attached to the gallon of ethanol at the point of production and generally remains affixed to the gallon throughout the supply chain. Thus, when a blender or refiner purchases a gallon of ethanol, it is also receiving the attached RIN (at no additional cost). The RIN is separated from the gallon when the ethanol is physically blended with gasoline by an obligated refiner or blender. At this point, the RIN becomes a tradable instrument for demonstrating compliance with annual RFS blending requirements. Informas analysis uses accepted and proven statistical methods to examine whether any type of causal relationship existed between RIN prices and retail gas prices since 2013. The results of the statistical tests revealed no relationship. In summary, the evidenceleads to the conclusion that changes in RIN prices have not caused changes in retail gasoline prices (or vice-versa), the report found. To any extent that the two are related, it is not a direct causal relationship. Commenting on the report, RFA President and CEO Bob Dinneen said, This study should finally put to rest the oil industrys ridiculous argument that RINs somehow affect the retail price of gasoline at the pump. The bottom line is that RINs are free for refiners who purchase and blend required volumes of ethanol with gasoline. Only those refiners who stubbornly refuse to blend required ethanol volumes have a need to buy separated RINs on the open market; and in the highly competitive gasoline marketplace, there is no way they can pass those costs on to consumers and remain competitive with refiners and blenders who are blending more ethanol than required. Dinneen continued, Regrettably, some decision-makers appear to have bought into Big Oils erroneous suggestion that RIN prices are somehow connected to retail fuel prices. This report from Informa Economics sets the record straight and should clear up any remaining confusion about the relationship, or lack thereof, between RINs and consumer gas prices. Energy policy and regulation should be guided by science and thoughtful analysis, not Big Oils self-interested talking points. The study, which was prepared by Informa Economics on behalf of the Renewable Fuels Association, is available here.