Uncertainty and speculation surrounding an E15 waiver and a biodiesel tax credit for 2018 have undermined overall RIN prices early in 2018. The biodiesel tax credit will likely be approved retroactively for 2017 after recent federal budget negotiations but if a 2018 biodiesel tax credit is not approved, look for a sharp rebound in RIN prices in 2018 on bullish fundamentals.
U.S. imports of biodiesel from Argentina have all but disappeared since countervailing tariffs were added in July. Without Argentina imports in 2018, a large component in RFS compliance in recent years, the U.S. will need to raise domestic production or encourage additional imports, both of which are bullish for B100 prices. If the biodiesel tax credit is not finalized, RIN prices will need to rise to encourage the additional blending needed under RFS.
Although more U.S. ethanol is expected to be blended into the U.S. gasoline pool this year, due to gasoline demand growth and the relative strength of ethanol, it will not be enough to offset additional production capacity and weaker export markets.