Publications: Notes at the Margin

The RVO: The Supremes, the Winners, the Losers, and Pass-through Economics

May US Gasoline Consumption Still Depressed from 2019: BEA (June 28, 2021)


On Friday, the US Supreme Court ruled on the appeal of three small refiners that were denied relief from the Renewable Fuel Standard (RFS) program requirements by the Environmental Protection Agency in 2017. A lower appellate court opined that the small refiners were not eligible for a reprieve because previous relief had not been “extended.” The Supreme Court overturned that decision.


The RFS judgment will significantly alter the market for renewable identification numbers (RINs), the credits used for compliance with the RFS and what the EPA describes as the “currency” of the program.[1] The demand for RINs will be reduced. Though the size of the reduction cannot be determined, RIN prices will fall, as will the renewable volume obligation (RVO), the renewable fuel blending requirement for refiners and importers reported by Argus Media, OPIS, and S&P Global Platts and used to determine the per-barrel RVO cost.


According to our analysis, the lower RIN price will be passed through penny for penny to retail prices. Thus, the reduced RIN expense for refiners and importers will bring gasoline prices down and benefit consumers.


An upcoming decision by the EPA regarding the RVO for 2022 may further depress RIN prices. The agency might conclude that the burden of the RFS program is excessive. A decision to relax the RVO would also be good for consumers. It would help, too, anyone that purchases corn for feed or food because as much as forty percent of US corn output goes into ethanol production. Corn farmers would be hurt, though, by the reduced demand for corn.


That said, corn prices today are near a fifteen-year high, having doubled from August 2020. The EPA administrator may decide to relax the RFS requirement to ease the price pressure on meat and other consumables. The law provides the agency with such authority.


Here, though, we will keep our focus, in the first section of this report, on how RVO and RIN price changes affect gasoline spot prices. While this subject is technical, knowing how the economics work is vital to trading profitably and managing the petroleum business.


The second part of the report summarizes data on May US gasoline consumption just released by the Bureau of Economic Analysis. Gasoline purchases in that month lagged the same month in 2019 by almost six percent.

[1] See “Renewable Identification Numbers (RINs) under the Renewable Fuel Standard Program,” EPA [].


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