“A bipartisan group of U.S. lawmakers presented legislation this week that directs the Biden administration to enable oil refiners to purchase compliance credits for U.S. biofuel blending laws at a fixed, reduced cost compared to the open market.
The objective of the proposal is to alleviate the escalating compliance expenses associated with the U.S. Renewable Fuel Standard (RFS) and provide support to struggling refineries during a period of significant volatility in global energy markets, as stated by lawmakers.
As part of the standard, oil refiners are required to blend billions of gallons of biofuels into the nation’s fuel mix or purchase tradable credits from those who do.
Refiners argue that these mandates are costly, while proponents of biofuels, such as ethanol producers and corn farmers, support the obligations as they increase the market for their products.
According to a press release, the proposed bill allows refiners to acquire credits for conventional biofuel blending, including corn-based ethanol blending, at a fixed price if they are unable to obtain them at cost-effective levels from the market.
Following the announcement of the bill, the prices of the credits, known as Renewable Identification Numbers (RINs), experienced a decline.
Chris Coons, who introduced the bill along with fellow Democratic Senator Bob Casey and Republican U.S. Representative Brian Fitzpatrick, stated, “We can and must take additional measures to address the volatile and soaring compliance costs driven by fuel mandates that do not align with domestic fuel demand.”
It remains uncertain whether this measure, revealed on Tuesday, will gain approval. Matters concerning the RFS typically attract vigorous lobbying efforts from advocates of both oil refining and biofuels.
For the bill to become law, it must pass through both the Democratic-controlled Senate and the Republican-led House of Representatives before reaching President Joe Biden’s desk for his decision on whether to sign it.
Traders noted that renewable fuel credits traded at $1.54 each on Tuesday after the bill’s release, down from $1.56 prior. On Wednesday, credits traded between $1.55 and $1.56 each following the release of U.S. government data.”
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