In my February 5 post, “Prove It”, I explained rack prices show a refiner’s BOB-related RIN expense is not fully passed through to the BOB purchaser. For Big Oil refiners receiving free RINs, this is no big deal and, in fact, any pass through at all is a detriment to the overall Big Oil enterprise. See Big Oil’s Free RINs – The Root Cause. For merchant refiners, however, every cent of pass through failure is a direct hit to the bottom line.
Near the end of “Prove It”, I discussed “The Pass-Through of RIN Prices to Wholesale and Retail Fuels under the Renewable Fuel Standard” by Knittel, et al. I concluded the clear difference between New York Harbor and Los Angeles Harbor BOB spreads displayed in Figure 8 of the paper was consistent with complete pass through only where BOB imports are the marginal supply and with incomplete pass through where the BOB market is over supplied and BOB producers fight for market share.
On February 1, 2018, I sent this email to Dr. Knittel to discuss this issue. As of this posting, there has been no response.
Best,
Bob