U.S. renewable fuel credits sunk to their lowest levels in two months amid efforts by President Donald Trump’s administration to mediate talks between oil and corn interests over ways help refiners meet the country’s biofuels policy, traders said. The rival groups gathered for their second meeting in as many weeks on Wednesday with no resolution, but Republican Senator Ted Cruz of Texas is expected to circulate specific proposals for corn-state lawmakers to consider in the weeks ahead, according to Iowa Republican Senator Chuck Grassley’s office.
The discussions have fueled speculation that the two sides could come up with a way to help refiners deal with the costs of compliance credits under the U.S. Renewable Fuel Standard (RFS) while protecting a program beloved by the ethanol industry.
“Sen. Grassley’s priority and there was an understanding expressed broadly in the meeting that any outcome can’t undermine the integrity of the RFS,” Grassley spokesman Michael Zona said. Prices of renewable fuel (D6) credits were traded at roughly 74 cents on Wednesday, its lowest levels since early October, according to traders and Oil Price Information Service. The credits were trading at 90 cents each at the end of November.
The price drop was due largely to reports that U.S. Senators led by Cruz were able to convince the Trump administration to help compel corn-state lawmakers like Grassley to participate in discussions over potential changes to the RFS. Traders also cited some unexpected selling by small refiners who were granted waivers from the program by the U.S. Environmental Protection Agency.
“The small refiners were bringing the price down, but the talks in DC really added fuel to the sell off,” a trader said. The meeting on Wednesday included staff from the offices of Republican Senators Cruz and Pat Toomey of Pennsylvania, both representing the oil-refining industry, sources told Reuters.
On the corn side, staff from the offices of Republican Senators Grassley and Joni Ernst of Iowa, along with Deb Fischer of Nebraska, the sources said. Staff from the White House, the U.S. Environmental Protection Agency and the U.S. Department of Agriculture also attended.
The RFS was introduced more than a decade ago by President George W. Bush as a way to boost U.S. agriculture, slash energy imports and cut emissions, and it has since fostered a market for ethanol amounting to 15 billion gallons a year.
Refining companies – like Philadelphia Energy Solutions and Monroe Energy, both of Pennsylvania, along with Texas giant Valero Energy Corp – that do not have adequate facilities to blend biofuels into their products are required to purchase blending credits called RINs from rivals that do.
They have pressed the administration to adopt reforms that would lower the credit costs, but the ethanol industry has successfully defeated those efforts.