Accurate modeling of RIN prices
The Hoekstra IMS RIN price spreadsheet model accurately tracked the D4 RIN price during 2021. The green data points are the daily closing price of the 2021-vintage D4 RIN reported by Banyan Commodities. The black line is the price calculated by the model using weekly data on biodiesel and ultra-low sulfur diesel (ulsd) prices. All other model parameters are held constant.
Steady increase in first half
The D4 RIN price rose because of increasing soybean oil and biodiesel prices.
For example, in late April, the soybean oil price increased from $4.97 to $6.17 per gallon and the biodiesel price rose from $5.02 to $6.05 per gallon. This was compensated by only a $0.11 increase in the price of ulsd. Accordingly, in mid-April, the model-calculated RIN price jumped from $1.55 to $2.00 as predicted by economic theory, and the actual RIN price followed.
Steady decrease from June to October
The model-calculated RIN price fell to a low of $1.06 in mid-October as soybean oil fell by $1.30/gal with corresponding reduction in biodiesel price. The actual RIN price followed the same general pattern.
Model explains 72% of variance in RIN price
This linear regression of actual vs. calculated D4 RIN prices says the model explains 72% of the variation in weekly RIN price:
Conclusion
- The Hoekstra spreadsheet application of the IMS RIN price model accurately tracked the trends in 2021 RIN price.
- This verifies previous conclusions that RIN prices follow fundamental economic and asset pricing theory.
Recommendation
Considering the importance of RIN prices for profitability, every company interested in or affected by RINs should have at least one person with good understanding of RINs price theory and access to daily use of the IMS RINs price model which is based on economic fundamentals and has been proven to accurately model real-world RIN prices. The first step in getting this capability is to get Hoekstra Research Report 10.
Recommendation
Anyone with a stake in RINs pricing and economics should get Hoekstra Research Report 10 which includes the Hoekstra ATTRACTOR spreadsheet spreadsheet that accurately calculates D4T, the theoretical RIN price, tracks it versus quoted market prices, and predicts how RIN prices will change with the variables that affect them. Why not send a purchase order today?
George Hoekstra george.hoekstra@hoekstratrading.com +1 630 330-8159
Anyone with a stake in RINs pricing and economics should get Hoekstra Research Report 10
For more information
See this overview and this technical description of the IMS RIN price model.
George Hoekstra
george.hoekstra@hoekstratrading.com
+1 630 330-8159
