From Bloomberg Gadfly, Aug. 17:
Carl Icahn is always unpredictable.
But I think Icahn might have outdone himself this week in an interview with Bloomberg TV when he quoted the head of the refining company he controls, CVR Energy, as saying that "if Pablo Escobar were alive, he wouldn’t be doing coke, he’d be trading RINs."
Get it? Pablo Escobar! He's the guy who made so much money in the flush days of the cocaine trade that he built a hacienda featuring its own sculpture park, private airstrip, bullring, cart-racing track and zoo (the hippos from that zoo ended up roaming the Colombian countryside, unattended).
In other words, "renewable identification numbers," or RINs, are so lucrative that drug dealers would swap jobs to trade them.
Icahn doesn't like RINs, mind you. He just knows that they're lucrative -- and that they make about as much sense as lost hippos wallowing in a Colombian river.
RINs are essentially certificates used to prove that a gallon of gasoline has been blended with ethanol or biofuel -- as federal regulations require. The burden of compliance in this renewable energy push falls on refiners, even though many of them don't actually blend all the fuel they produce (it is often done, instead, by wholesalers and marketers).
So refiners have to purchase RINs on the open market to prove that they've done their regulatory duty, leaving them at the mercy of sellers who know they have a captive set of buyers. The need to fix this "rigged" market -- a depressingly familiar term in this election year -- was the subject of a letter Icahn sent to the EPA last week.
RINdignation was a fairly consistent theme on second-quarter earnings calls across the entire refining sector. Refiners are fed up with this game, and here's why:
RINtolerableAverage RIN prices have climbed back to their highest level in almost 3 years...MORE
