Sulfur Credit Strategy Pays Off For Refiners

The price of the Tier 3 gasoline sulfur credits has increased 12-fold in the last two years, and the impacts have been showing up in refining companies’ earnings.

Four years ago, Dave Lamp, CEO of CVR Energy Inc., spoke about CVR’s Tier 3 strategy in their 2nd quarter 2019 earnings conference call:

Dave Lamp, answering question from Matthew Blair, Managing Director, Tudor Pickering, Holt & Co., July 24, 2019

“For those refiners who are prepared for this, it (Tier 3) is going to be very, very lucrative, I think, and for those that aren’t, it’s going to be very expensive.”

Dave Lamp, CEO CVR Energy Inc., July 24, 2019

Four years later, in last week’s earnings conference call, Dave explained how that strategy paid dividends this year by allowing CVR to get through an unplanned shutdown unscathed on profits:

Question from Munav Gupta, Executive Director, UBS Securities, August 1, 2023

“Very strong refining results if one didn’t know that there was an outage at the gasoline hydrotreater, there’s no way the results would tell you that. So, help us understand because we do know there was some kind of outage how you manage so well around this outage? And if it had not happened, would the results –would have been actually even better than what we saw yesterday?

Manav Gupta, executive director, UBS Securities

Answer from Dave Lamp, CEO, CVR Energy Inc.

Well, as you know, that where the fire occurred was in a gasoline hydrotreater, which basically takes gasoline and treats down the sulfur to meet Tier 3 specs. We’ve been running that unit for quite a long time and at both Coffeyville and Wynnewood wouldn’t have generated significant credits. We monetize some of those credits during this time. And those –all those credits are on our balance sheet at zero value. So, you didn’t see much impact on the financials. We are hurt a little bit because we –those are credits we could have sold, which right now are selling around $2,500 per credit, and we could have sold those in the future.

Dave Lamp, CEO, CVR Energy, INC.

In the last 2 years, the price of the Tier 3 sulfur credit has soared 12-fold, from $220/million ppm-gallon in August 2021, to $2,800/million ppm-gallon today. Hoekstra Trading has been predicting this since 2018, based on our 3-year Tier 3 research program documented in three annual reports, Hoekstra Research Report 6, Hoekstra Research Report 7, and Hoekstra Research Report 8. which are available to anyone.

Clients who participated in our research program and/or bought our reports, including CVR Energy, understood the Tier 3 situation and benefited greatly from proactive strategies, including strategies to buy and/or generate a bank of Tier 3 credits early in the game. As Dave predicted, many others are being hurt badly today by octane costs much higher than the industry average. Those companies are reporting lower gasoline margin capture rates, weaker refining segment performance, and weaker stock price performance.

All refiners can still benefit today from increased focus on improving gasoline octane/sulfur performance for the Tier 3 world, a topic that has been, at best, low priority in the industry for many years.


Every refining executive should have a comprehensive understanding of the technical, regulatory, and economic aspects of Tier 3 gasoline, the sulfur credit program and how they affect your business. Those wanting a quick education on the Tier 3 issue should get the short book, Gasoline Desulfurization for Tier 3 Compliance, which will make you an industry expert in a day. Once you have become expertly informed of the problem, you can save your team years of redundant work by buying Hoekstra Research Report 8. We saw this situation coming, did the research and field tests, ran the simulations and analyzed the results so you and your team can take immediate steps to increase gasoline margin capture in the Tier 3 world. The report includes detailed pilot plant and commercial field test data, full detail of sulfur credit pricing, spreadsheet models to help improve gasoline optimization, sulfur credit strategy and refining margin capture in the Tier 3 world.

Don’t get caught panic buying after the credits spike.

George Hoekstra

+1 630 330-8159

Hoekstra Trading LLC