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2018 RVOs don't hold surprises for US biofuels markets, but concerns linger

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Listen: 2018 RVOs don't hold surprises for US biofuels markets, but concerns linger

The US Environmental Protection Agency's proposed 2018 renewable volume obligations were released July 5, and responses from biofuels and oil industry players were mixed. Biofuels reporters Josh Pedrick and Wes Swift, as well as policy reporter Brian Scheid, crunch the numbers and consider how ethanol and biodiesel markets could be affected, as well as how RINs and trade flows factor into the equation.

See the detailed numbers for the proposed 2018 biofuel blending mandate here.

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Podcast Transcript

2018 RVOs don't hold surprises for US biofuels markets, but concerns linger

Josh: Welcome to the Commodities Spotlight Podcast from S&P Global Platts, I’m Josh Pedrick, here with Wes Swift, and we’re the biofuels reporters here at Platts and today we’re talking about the EPA’s proposed 2018 RVOs, released yesterday.

Wes: We don’t want to throw a lot of numbers at you, they’re available on the EPA’s website or on But the total volume went down 40 million gallons, all in the advanced mandate, while ethanol held steady at 15 billion gallons.

Josh: It doesn’t sound like these volumes came as a huge surprise. The market had been waiting on these numbers for weeks and rumors were circulating that the delay was because the EPA was tweaking them lower.

We’ve also got Brian Scheid, our policy reporter in Washington, here with us to fill us in on some of the reaction to the RVOs. Brian, what are you hearing?

Brian: Thanks guys, the response to Wednesday’s proposed volumes was, obviously, mixed. Ethanol producers largely applauded the EPA’s announcement.

Bob Dinneen, president and CEO of the Renewable Fuels Association, said that EPA had stayed the course and maintained a strong RFS. By maintaining that 15 billion gallon level for corn ethanol, EPA will help drive infrastructure investment and push higher ethanol blends in gasoline, Dinneen said.

Anne Steckel, a vice president with the National Biodiesel Board, said, that the proposal to lower advanced biofuel volumes for 2018 by 40 million gallons and hold biodiesel volumes for 2019 flat at 2.1 billion gallons “continues to underestimate the ability of the biomass-based diesel industry to meeting the volumes of the RFS program.”

Steckel called the proposed volumes a “missed opportunity” for biodiesel but said the volumes were only proposed volumes and will work to raise them before the volumes are finalized by the end of November.

The American Petroleum Institute, an outspoken critic of the RFS, applauded the lowering of the biofuel volume for 2018, but said the proposal does not go far enough. API wants Congress to reform the RFS mandate.

They’ll be more going forward, I’m sure, back to you guys in Houston.

Josh: Thanks, Brian. Part of opponents’ concerns is that the transportation fuel expectations that the EPA used to build these RVOs would put ethanol blending above the 10% blend wall for people to comply. Now, we’ve gone through the blend wall in the past with higher ethanol blends like E15 and E85. But it remains on people’s minds.

Wes: Even though the EPA publishes the RVOs as flat volumes, compliance is really based on percentages of transportation fuel production.

Josh: Right, if expectations hold and the proposals are finalized at their current levels, obligated parties would have to blend 11.65% ethanol with gasoline. Even though the RVO for ethanol is 8.28%, that’s ethanol’s share in the total transportation fuel pool. But since ethanol doesn’t go into diesel it pushes its blend with gasoline higher to hit the compliance target.

Wes, how does biodiesel factor into this?

Wes: It sounds like the EPA took notice of a Department of Commerce investigation into whether the Indonesian and Argentinian biodiesel producers are illegal subsidizing and/or dumping product on to the US market. A decision is expected to come on those issues in the next 3 months.

There’s also the biodiesel tax credit that expired at the end of 2016. There are bills in Congress to reinstate the credit as a domestic production credit rather than a blenders credit.

Josh: And we’ve been hearing that biodiesel dumping investigation has really bolstered biodiesel and advanced RINs prices, right?

Wes: Correct, if either or both of these issues is resolved in the domestic industry’s favor, you’re facing a situation where biodiesel imports into the US would most likely be curtailed, leaving domestic producers with a large demand to meet under the mandates.

That demand is even larger when you realize that biodiesel could be expected to meet any deficit in the overall advanced mandate that hasn’t been met by biofuels such as sugar-cane based ethanol. That means biodiesel and RINs would be at a premium.

Josh: And speaking of RINs, people are expecting ethanol RINs to spike over $1/RIN in the coming weeks. It sounds like a lot of obligated parties held onto short positions thinking that Scott Pruitt would lower the ethanol blending level. Now that it doesn’t look that way, they’ll have to go buy ethanol RINs to cover those positions.

You can hold off on compliance for one year, but you have to make it up the next year. So anyone who thought they’d get some relief in 2018 now has to find some RINs. These proposals should be finalized by the end of November.

You can find more news, analysis and price assessments in the Biofuelscan, as well as on Thanks for listening.