EPA Exemptions Hammer RINs as U.S. Shutdown Deal Brings Only Temporary Relief

The EPA’s Friday ruling on 16 Small Refinery Exemption petitions sent another shock through the RIN complex, exposing how fragile confidence has become in U.S. biofuel policy. The agency granted two full exemptions and twelve partial (50%) waivers across compliance years 2021–2024, totaling roughly 740 million RINs. Analysts were quick to flag discrepancies in the agency’s math—150 + 70 + 250 + 260 ≠ 740—raising questions over transparency and data handling. Even allowing for rounding, the message was unmistakable: another half-billion gallons equivalent removed from blending demand.

Market reaction was immediate. D4 RINs settled Friday at $1.007/gal, extending a three-month slide from the August high near $1.20. Forward months softened, flattening the curve close to parity with D5 credits. Obligated parties moved to secure remaining banked volumes while producers paused forward RIN sales pending clarity on whether these waived gallons will be reallocated. The Iowa Soybean Association and Clean Fuels Alliance America renewed calls for full reallocation under the forthcoming Set 2 rule, warning that otherwise “RIN inflation will mask declining physical demand.”

Hours later, Washington’s second act brought short-term relief: a Senate continuing-resolution deal extended government funding through January 30, averting a shutdown that threatened to stall compliance reviews and 45Z guidance. Yet the reprieve is strictly temporary—EPA and IRS remain underfunded, and no clear path exists toward resolving the structural backlog of biofuel rulings. As one trader put it, “We got both policy inconsistency and policy paralysis in the same week.”

In Europe, biodiesel indicators stayed resilient. RME traded at $1,425/mt, with rapeseed oil €1,115/mt (€/US$ 1.155), keeping gross margins near $140/mt. The ICE Gasoil Nov/Apr spread eased slightly to +$66/mt. BOGO (+370) and POGO (+300) both widened, confirming the softer feedstock tone. Meanwhile, UFOP cautioned that the new EU Delegated Directive 2024/1405 could complicate certification and raise compliance costs for advanced grades in Germany. Menawhile EU Sunflower production rises a bit adding to supply side of oilseeds.

Across Asia, the tone remains stable. Palm oil futures (~4,100 ringgit or $985/t) held firm, freight softened by $10–30/mt, and Neste Singapore marked its fifteenth anniversary by reaffirming a 2.6 million-ton renewable-fuel capacity and expanding SAF output.

The week closes with a divided narrative: Washington delivered a temporary lifeline to governance but a lasting blow to credibility. Policy uncertainty, not fundamentals, continues to dictate biofuel sentiment—and with D4s barely above $1.00, the sector begins another week balancing volatility against diminishing trust in its regulators.