Irving Oil said to cause spike in value of ethanol credits

A sudden buying spree by Canada’s biggest oil refinery triggered a 20 per cent spike in U.S. renewable fuel credits last week, market sources said last Friday, highlighting the volatile nature of the opaque, thinly traded market.

Privately owned Irving Oil, operator of the 300,000 barrels-per-day (bpd) plant in St. John, New Brunswick, entered the market to buy so-called Renewable Identification Numbers (RINs) in large quantities last week, causing prices to surge, four industry sources told Reuters.

The U.S. Environmental Protection Agency (EPA) requires fuel manufacturers to blend a set amount of their output each year with renewable fuels such as ethanol. To ensure compliance, the EPA requires refiners and importers of gasoline to present RINs credits equal to their amount of obligated blending volume. If they don’t blend enough ethanol, they may have to buy the credits on the open market, where prices have been surging.

Through its U.S. terminal operations, Irving is the biggest importer of gasoline to the United States. It is required to acquire RINs for each shipment in order to meet U.S. mandates to blend more ethanol and biofuel into gasoline and diesel.

A spokesperson for the company declined to comment.

RINs prices began to rally in May amid concerns that refiners may fail to meet their targets for next year. This week’s buying by Irving Oil accelerated those gains. Each RIN represents a single gallon of fuel ethanol.

Ethanol RINs for the 2013 compliance year had risen from $1 in June to $1.20 each a week ago. But they jumped to around $1.32 on Monday and to $1.44 on Wednesday. By Thursday they were heard traded at a record high of $1.48 per RIN.

The bidding eased by Friday, with prices slipping back to $1.33.

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