D4 RIN Price – What’s the Outlook for 2025?
September and October brought bullish predictions for the D4 Renewable Identification Number (RIN). So far they have not played out. What’s the outlook for 2025?
Bullish sentiment was in the air this autumn, when D4 RIN market prices broke into the low 80’s from a February low of 39 cents (much like happened with Chicago temperatures!). During 3rd quarter industry conferences and producer earnings conference calls, the buzz was unanimously bullish, with prominent forecasts of a $1.25 price by early 2025.
But as winter came, the price slumped below 60 cents, and it now looks set to close the year well below those recent peaks.
About RIN price forecasting . . .
Prognosticators tend to focus too much on the outlook for government policy. Policy is indeed the foundation of industry profitability, but, in fact, changes in RIN prices from month-to-month and year-to-year correlate better with changes in other economic variables that affect RIN prices, given the policy in effect today.
Focusing on economic fundamentals allows one to quantify sensitivities to the different factors that affect RIN prices, that is, to identify which factors are most likely to drive future RIN price changes. Government policy is one of them, but rarely the most important one.
For example . . .
As one example from recent history, contrary to popular opinion, the 2023 crash in D4 RIN price was caused more by falling feedstock prices (due to Chinese imports) than by the June 21, 2023 announcement of the 2023-2025 Renewable Volume Obligations (RVO)s.
In mid-2023, D4 RIN prognosticators would have done well to focus less attention on what was happening in Washington D.C. and more on what was happening to feedstock prices.
A prediction . . .
Similarly, those forecasting RIN prices for 2025 will do well to focus less attention on what is happening in Washington D.C. and more on the decisions to be made in the C-Suites of renewable diesel producers.
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