All Eyes On Renewable Diesel – Part 5, Hard Numbers On RD Margins

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Read other posts in this series: All Eyes on Renewable Diesel Margins:

• Part 1, Get Ready For Q1 Earnings Reports
• Part 2, The High Cost of Renewable Diesel
• Part 3, RIN Price Crash Wipes Out Free Market Gains
• Part 4, What Caused the $1.70 Crash in RIN Value?
• Part 5, Hard Numbers on Renewable Diesel Margins

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Summarizing this 5-week blog series and its companion series, Upside Down on RBN Energy (watch for part 3 of that soon):

In April, 2021:

• A gallon of RD sold for $1.90
• That gallon cost $5.30 to produce
• The subsidies were $4.30
• This left a producer profit of 90 cents

In April, 2023:

• A gallon of RD sold for $2.50
• That gallon cost $4.60 to produce
• The subsidies were $2.00 (!!)
• This left a producer profit of negative 10 cents

The subsidies went down by $2.30 (!!)

Why did the subsidy go down by $2.30?:

• The California Low Carbon Fuel Standard (LCFS) credit went down by 60 cents
• The RIN value went down by $1.70 (!!)

The RIN value went down by $1.70 (!!)

Conclusion

• Until RIN pricing fundamentals are understood, the market will continue to get blindsided by unforeseen step changes in RIN values.

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Recommendation

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