NEW YORK, N.Y. (Reuters) — CME Group Inc. plans to launch a suite of contracts to trade renewable identification numbers in May, including RINs for biodiesel and ethanol.
RINs are 38-digit numbers generated for each gallon of ethanol or other renewable fuel produced in the United States. Refiners, importers and other “obligated parties” are required by the U.S. Renewable Fuel Standard program to blend the renewable fuels into finished gasoline and other products.
Ethanol credits have come under the focus of oil markets in recent weeks, following a steep run up in prices, which refiners say has helped give a small boost to the price of gasoline.
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They can present the RIN number to the U.S. Environmental Protection Agency for each gallon blended as proof of compliance. However, if they fall short, they must buy RINs on the open market, where prices have recently surged.
Market players said the move to an exchange contract could bring greater transparency to the RINs market. Ethanol credits are currently traded through individual deals agreed between buyers and sellers, some of which go through brokers.
“This will bring a lot more speculation and attention to the market,” said Shashi Menon, a partner with EcoEngineers, which offers a quality assurance program for RIN marketers.
“It will be easier for people to hedge against RIN prices by taking a position.”
The price of 2013 ethanol RINs has surged from a nickel per gallon in October to a recent peak of more than $1 per gallon in March, according to data from Argus Media, which tracks RINs prices. Prices have since fallen to around 80 cents a gallon.
Analysts have said concerns about a potential shortfall in RINs for 2013 has contributed to the run up in prices seen this year.
