Top Three Takeaways – from the 2025 OPIS RFS, RINs, and Biofuels Forum, Chicago
Takeaway Number 3: Blurring Boundaries
The rules of the renewable fuels game are increasingly being set more by politics and less by science and economics.
The most direct evidence of this trend is the hijacking of a thermodynamic constant called the Equivalence Value for use as a political tool. The Equivalence Value is the ratio of the energy contents of two different fuels, an important scientific factor that does not depend on politics.
But, as was ably explained by the former head of the EPA’s Fuel Program at this conference, the Equivalence Value is now being used instead as a political negotiating chip to tilt the playing field in favor of domestic versus imported biofuels, which will make its new meaning arbitrary.
That is not necessarily a bad outcome, but it inevitably comes with bad consequences, including loss of clarity and timeliness in setting critical boundaries of the program. And about timeliness, it takes only minutes to look up the energy content of a fuel, but it takes years to settle the costly lawsuits that stem from abuse of scientific constants as levers for political deal-making.
Takeaway Number 2: Cost Confusion
Last year, the popular annual Main Event, which features verbal arm wrestling among members of a panel representing major trade groups, was unusually cordial. This year, corn-versus-oil tensions were back on display.
A tag-team of three Ag-side representatives squared off against a team of one, from American Fuels and Petrochemical Manufacturers (AFPM), who bravely stood his ground against the prowling Big Ag rivals.
As usual, the match was expertly officiated.
The audience of 240, if it had been (an admittedly biased) jury, would have found AFPM guilty on all counts.
A prominent point in this year’s Main Event was AFPM’s claim that the Renewable Fuel Standard (RFS) costs $70 billion/year. AFPM has proposed an improvement they say would save $40 billion of that. The proposal is to adjust the volume mandates in a way intended to decouple the price of the D6 Renewable Identification Number (RIN) credit from that of the D4 RIN.
Specifically, AFPM’s proposed improvement would effectively dictate that a certain incremental volume of cheap renewable fuel (ethanol) MUST be replaced by a volume of much more expensive renewable fuel in the U.S. fuel supply. Currently, the different regulated fuels compete with each other on price in the open competitive market to earn that particular increment of biofuel volume, and ethanol wins that free market competition by a mile.
Think about that. How can you save $40 billion in program costs by mandating the replacement of a small volume of cheap renewable fuel with a more expensive renewable fuel? You can’t.
That mistaken notion stems from misunderstanding how RIN tax revenues pass through the supply chains and come out the other end in the form of subsidies for just those renewable fuels that require subsidies, a feat accomplished by the forces of free-market competition working through the supply chains in a non-intuitive way, bringing non-intuitive outcomes, in much the same way an advanced flow control system works to bring about desired but sometimes non-intuitive outcomes in a refinery flow control loop.
In this case, the (economic) advanced control system adjusts fluid prices instead of fluid flow rates. And misunderstanding the governing economic fundamentals causes a $40 billion mistake in the bottom line result.
The incremental cost of AFPM’s proposed improvement is in fact positive, not negative. And to quantify it requires properly accounting for how the RIN price control system accomplishes this value passthrough, a critical subtlety that is missing from the otherwise valuable AFPM-sponsored study.
Confusion over this (admittedly confusing) result can be easily clarified by seeing the results of careful application of basic principles you learned in Economics 101 to the RIN price control system. That application has been done, and we warmly welcome anyone who wants this clarity to accept the recommendation given below.
Takeaway Number 1: Five Factors
Most of this conference was focused, one way or another, on anticipating the next directions of RIN prices and industry profitability.
The overall mood was bullish. Higher than expected mandates, combined with rigorous RIN supply-demand accounting, plus informed prognostications on the outcome of the current round of SRE (Sustainable Revenue for Expensive lawyers — oops I mean Small Refiner Exemption) negotiations suggest a shortage of RINs in 2026, which would indicate higher RIN prices.
Hoekstra Trading’s theoretical D4 RIN value, (D4T) which is available with weekly updates to subscribers on the Bloomberg Terminal, currently stands 14 cents/RIN above the market price as shown on Figure 1 below, where the white line is D4T and the gold data are the market price of the most recent vintage D4 RIN:
The next big move in RIN prices will come from one of five wild card factors:
- One of those five factors is the above-mentioned separation of the D6 and D4 RINs.
- Of the other four factors, the only one getting significant attention in the main hall in Chicago last week was the possible increased use of ethanol in gasoline.
- The other three wild card factors lurk below the surface. Any one of them would bring price responses that will surprise most market players and should be anticipated in advance to get better positioned for the next RIN price shock.
Recommendation
To clear up confusion about renewable fuels and help anticipate future RIN price movements, Get Hoekstra Research Report 10 and the ATTRACTOR spreadsheet
Get the Attractor spreadsheet, it is included with Hoekstra Research Report 10 and is available to anyone at negligible cost.
George Hoekstra george.hoekstra@hoekstratrading.com +1 630 330-8159
