PBF Energy to increase investment by $100m for bio-fuel credit purchase

PBF Energy, a US-based fuel refiner, has increased its investment by $100m, in order to purchase of bio-fuel credits, renewable identification number (RIN) for the year 2013.

The increase in investment to $160m, from previous estimates of $60m, is said to be in the wake of rising prices for the renewable fuel credits.

According to a regulation in the US, fuel producers are required to blend 10% of ethanol in their gasoline production.

The processors, however, opt for bio-fuel credits such as RIN to do away with blending, and with this move, the prices of these credits have peaked.

The price of ethanol credits that was 5 cents in October 2012 has increased to more than one dollar in six month period by March 2013.

PBF, currently, is short of 400 million RINs to abide by the law, reported Reuters.

It also said that the rising prices have affected the company’s quarterly earnings and as a result it would now blend more of its fuel output.

Commenting on the market developments, PBF Energy chairman Tom O’Malley remarked that the company had to invest additional $10m from its fixed budget of $15m to buy ethanol credits during the first quarter with their prices peaking.

The rise in the price of these credits is a cloaked tax on the public as fuel producers try to compensate the extra cost by increasing the fuel price.

Further, PBF is planning to blend 75% of its fuel output with ethanol from the latter half of the year 2013. Currently, it blends 50% of the produced fuel.

The company would also seek to reduce its RIN usage by exporting more of its refining output, O’Malley revealed.