RINs at 2.30 and the Political Fracture Inside Biofuels

D4 RINs exploded again higher on Thursday with June 2026 D4 futures trading at 2.30, December 2026 at 2.322 and December 2027 at 2.348, extending what has become an almost daily repricing of the US biomass-based diesel mandate. The move comes as traders increasingly realize that the finalized EPA RVOs are structurally tightening the available pool of qualifying feedstocks while renewable diesel and SAF capacity continue to expand across North America.

D4 RINs

The implications are now spreading well beyond the US biodiesel market. Soybean oil for July delivery closed at 76.70 c/lb, equivalent to roughly $1,691/mt, while July heating oil traded at $3.5711/gal and June ICE gasoil collapsed another $16.25/mt to $1,030.75/mt. Despite weaker European diesel futures, BOGO exploded to $668/mt for July and remained historically elevated at $691/mt for March 2027. Bean oil expressed as a percentage of gasoil has now reached 1.65x for July and nearly 1.77x for early 2027 positions, levels that are historically difficult to sustain.

What is becoming increasingly visible is that the US soybean complex is no longer trading on traditional agricultural fundamentals alone. Soybean crush margins in the United States surged to 384 cents/bushel for July 2026, equivalent to roughly $141/mt, one of the highest levels ever observed. Oilshare has climbed above 53%, also near historical extremes. This means soybean oil alone now represents more than half of the total crush value in the United States, a structural distortion created primarily by renewable diesel, SAF economics and the RFS compliance market.

Oilshare

Outside the United States, the economics look dramatically different. FOB Paranagua soybean oil for nearby shipment was still offered around -2200 points versus CBOT July futures, improving only modestly to around -1650 for OND positions. The market is therefore signaling that even after the recent correction, South American soybean oil is still not cheap enough relative to the extraordinary premium structure now embedded inside the US domestic market.

This distortion is increasingly creating what traders are starting to call an “RFS island effect.” US crushers can pay significantly higher prices for soybeans because the soybean oil portion of the crush carries compliance value through D4 RINs, LCFS credits and renewable diesel demand. Crushers in Argentina, Brazil and Europe do not benefit directly from those mechanisms. As a result, soybean processors outside the US are increasingly dependent on traditional meal-led crush economics while competing against American plants operating under subsidized oil-led economics.

The strain is now becoming visible in South America. The Argentine strike highlights the growing stress inside the soybean crushing sector as margins outside the United States continue to deteriorate. While US crushers enjoy historically high crush margins, many international processors are facing the opposite situation because they cannot monetize soybean oil through the American renewable fuel system. This creates the risk of capacity shutdowns or reduced operating rates outside the US precisely when American processors are incentivized to maximize throughput.

One of the most important second-order consequences is the growing possibility that the United States could become an aggressive exporter of soybean meal at depressed global prices. Because US crushers are increasingly processing soybeans for the oil rather than the meal, the market could face an oversupply of meal exported from the United States at levels difficult for international crushers to compete with. This would place additional pressure on crushers in Argentina and Brazil that still rely heavily on soybean meal margins for profitability.

Ironically, China may become one of the few external beneficiaries of this distortion. Chinese crushers importing US soybeans are indirectly able to capture part of the elevated soybean oil value embedded in the US soybean complex, even after transportation costs. This creates a situation where US soybeans become structurally more attractive to import while competing crushers elsewhere struggle with negative margin pressure.

The refining industry meanwhile faces an increasingly dangerous compliance burden. At D4 RINs above 2.30, the renewable volume obligation liability for independent refiners is becoming extreme. Many merchant refiners without significant blending infrastructure are now facing compliance costs that continue to rise regardless of underlying refining margins. The higher D4 RINs move, the greater the financial transfer from obligated refiners toward renewable fuel producers and blenders. Traders are increasingly discussing whether further escalation toward 2.50 or above could create financial casualties among smaller independent refiners required to comply with the mandate.

These RIN values are increasingly becoming a political time bomb that eventually may have to be addressed in Washington. The current structure effectively transfers billions of dollars from the refining sector toward biofuel producers, feedstock holders and blenders. At current levels, the RVO system is no longer functioning as a marginal compliance mechanism but rather as a major economic redistribution system inside the US fuel market. If refining margins weaken further while compliance costs continue to rise, political pressure from merchant refiners and fuel consumers is likely to intensify sharply.

The easiest way for the administration to lower RIN values without formally cutting RVO mandates would be to expand the pool of qualifying supply. That could include relaxing treatment of imported biodiesel and renewable diesel from qualified plants, widening eligible feedstock pathways, delaying any reduction in RIN generation for imported feedstocks and potentially revisiting imports of Argentine SME biodiesel if sustainability and qualification requirements are met. The market increasingly understands that if Washington wants lower RIN prices without politically damaging the farm belt through lower RVOs, additional imported compliance barrels become the most practical pressure valve.

Ironically, the current structure is also creating a growing split inside the biofuels industry itself. Conventional Midwest biodiesel producers are currently benefiting from exceptionally strong economics as long as 45Z guidance and RIN qualification remain intact. Integrated soybean crush and FAME biodiesel systems located near feedstock supply are capturing historically elevated oil values and compliance margins.

The situation is more fragile for some renewable diesel producers, particularly along the Gulf Coast. Many RD facilities rely heavily on imported UCO, tallow or foreign bio-intermediates while carrying substantially higher hydrogen, natural gas and capital costs. If Washington ultimately responds to high RIN prices by relaxing import restrictions or widening feedstock access, the resulting collapse in D4 RIN values could compress renewable diesel margins far more aggressively than conventional Midwest biodiesel economics. The market is increasingly recognizing that not all biofuel pathways benefit equally from current policy structures.

The market is also debating an increasingly uncomfortable possibility. If Middle East tensions were to ease substantially and ULSD prices were to retreat sharply, D4 RINs may paradoxically move even higher. With Gulf ULSD futures recently near $4.50/gal, some traders are already discussing scenarios where a large diesel correction could push D4 values substantially beyond current levels because biodiesel replacement economics become more punitive under the current mandate structure.

Washington meanwhile continued hearings this week regarding implementation details of the 45Z clean fuel production credit. Multiple industry groups warned Treasury that unresolved questions surrounding prevailing wage rules, apprenticeship requirements and GREET model calculations are creating major uncertainty for renewable fuel producers. Biofuel associations argued that many rural plants lack access to qualifying apprenticeship programs while others stressed that the current GREET model still does not fully reflect the recent removal of ILUC penalties by Congress. Several producers also warned that taxable years closing later this summer leave very limited time for final guidance, creating uncertainty around investment decisions, production planning and feedstock procurement.

At the same time, US refiners continue to maximize distillate production. US jet fuel production reached approximately 2.07 million bpd last week, the second-highest weekly level ever recorded, while production has now exceeded 2 million bpd for six consecutive weeks. Strong distillate cracks continue to incentivize maximum refinery throughput even as compliance costs rise sharply through the renewable fuel system.

US Jet Fuel Production

In Europe, ARAG biodiesel premiums remained elevated despite the correction in ICE gasoil. FAME 0 traded around $1,457/mt month-to-date while RME averaged roughly $1,500/mt and UCOME nearly $1,616/mt. UCOME swap premiums versus gasoil surged above $620/mt during the week before retreating toward $454/mt month-to-date averages. HVO Class 2 values remained near $2,951/mt with HEFA-SPK indications still above $1,300/m3, reinforcing that the renewable distillate pool remains structurally tight globally despite recent weakness in flat petroleum prices.

SAF policy support also continues expanding across the United States. Minnesota expanded its SAF tax credit program this week while additional SAF-related legislation and investment announcements continue emerging across multiple states. The market increasingly recognizes that aviation decarbonization policy will compete directly with renewable diesel and biodiesel for the same limited pool of feedstocks.

The broader conclusion from this week’s price action is that the biodiesel and renewable diesel market is no longer functioning as a normal agricultural derivative market. The combination of RVOs, D4 RINs above 2.30, LCFS incentives, renewable diesel expansion, 45Z uncertainty and SAF policy support is now restructuring global soybean crushing economics, distillate supply chains and refining profitability simultaneously. The market is increasingly pricing policy barrels rather than agricultural fundamentals alone and poses increasing political risks.