AM-13-29 Meeting Your Renewable Fuel Obligations in 2014

Description:

When the current Renewable Fuels Standard (RFS) was created by the Independence and Security Act of 2007, it was envisioned that ethanol would gradually be added into the base gasoline supply up to a level of 10% (E10). After this level was achieved (i.e. the “blend wall” was hit), it was assumed that additional gasoline grades (E15, E20, E85 etc.) would be either introduced and/or promoted which would allow for ever increasing volumes of ethanol to be utilized. This plan does not appear to be materializing however, and 2014 and 2015 appear to be the transition years when the ability to meet the mandate becomes extremely difficult if not impossible. Based on recent trends including rising renewable fuel mandates, declining gasoline demand, and miniscule sales of higher ethanol content fuels like E15 and E85, it appears there will not be sufficient Renewable Fuel Identification Number (RIN) credits available to meet the mandated level as early as 2014. Unless massive new E15 or E85 markets can be developed quickly, the available E10 gasoline pool will become insufficient to accommodate the portion of the renewable fuel mandate expected to be met by ethanol. However, concerns over E15 liability usage voiding auto warranties is a significant impediment to growth of that market. Also, the number of vehicles that can use E85 precludes growth of the E85 market to be enough to solve the problem. Therefore, we see 2012 as the first year in which renewable fuels RIN production is less than the yearly Renewable Volume Obligation (RVO). Without changes to the current limitation, this condition is projected to continue until there are enough alternative fuel vehicles in the transportation sector to allow significant sales of E85. The shortfall in 2012 will be mitigated by the large stockpile of stored RINs that was carried over from last year. It appears there will also be sufficient inventory of RINs to meet the 2013 mandate. However, by 2014, the RIN stockpile will be fully depleted and obligated parties will not be able to meet their RVO.