Our team is constantly evaluating the effects the current COVID-19 crisis is having on our economy. Restrictions on travel, as well as a general economic downturn, have had an impact on the actual volumes of transportation fuel required. Should the COVID-19 pandemic result in a substantial reduction in U.S. gasoline and diesel fuel consumption, a corresponding reduction in Renewable Identification Numbers (RINs ) – the credits used for compliance which are the “currency” of the RFS program — may result, as the existing purchase obligations were based on the higher volumes of the EPA’s existing Renewable Volume Obligations (RVOs) regulation.
However, as the COVID-19 economic slowdown eases, demand should recover and even increase with the support of low fuel prices. In addition, the decreased fuel demand will have different impacts in the two major fuel pools – gasoline and diesel. For gasoline, where the ratio of ethanol to gasoline is effectively fixed, falling demand will likely reduce the deficits generated by the petroleum portion of the fuel; it will also reduce the credits earned by the 10 percent portion of the fuel that is ethanol. There should not be a change in the contributions for alternative fuels to gasoline, like electricity and hydrogen.
In the diesel pool, it is likely that any reduction in demand will be absorbed by the petroleum diesel volume, not the biodiesel or renewable natural gas shares. Instead, it is likely that all the alternative and renewable diesel fuel volumes (renewable diesel, biodiesel, compressed natural gas (CNG), and liquefied natural gas (LNG) will hold steady or will continue their historic growth.
Ethanol and biodiesel producers with low-carbon-intensity (CI) products will continue to have a marked advantage over those with higher carbon-intensity products. In addition, much of the demand in California and the U.S. comes from delivery fleets operated by UPS, FedEx and Amazon, and demand from these businesses is increasing during the COVID-19 lockdown