US ethanol credit prices fall on refiner blending

NEW YORK, March 25 (Reuters) - U.S ethanol credit prices have dropped recently as oil refiners look to blend more of the alternative motor fuel into the gasoline pool as the ethanol premium, an exchange executive said.

Prices for the credits, known as Renewable Identification Numbers, or RINs, have fallen about 44 percent since late January for the 2008 vintage which expires in 2010.

Prices for 2009 RINs, which expire in 2011, have fallen about 15 percent to 14 cents.

The drop in RIN prices has come as the premium of ethanol prices compared to gasoline prices has evaporated to only a few cents per gallon. The spread had been about 40 cents just months ago.

"As ethanol gets lower and gasoline becomes higher it tends to fuel the demand for ethanol" from oil refineries and fuel blenders, said John Gelbard, who heads the New York-based Rinxchange, the only bourse on which the credits are currently traded.

He said ethanol prices have fallen over the week on softer corn prices and as Valero Energy Corp's (VLO.N) buying last week of ethanol plants from bankrupt ethanol maker VeraSun Energy Corp VSUNQ.OB eased concerns that federal mandates will not be met.

U.S. fuel blenders and refiners are required to blend about 10.5 billion gallons of biofuels like ethanol into gasoline this year under a 2007 law known as the Renewable Fuels Standard. The mandate goes up to 36 billion gallons by 2022.

Each blender and refiner has to mix a required amount of biofuel into their gasoline or face fines. To track how they are doing, the government assigns each gallon of biofuel a RIN. Each year refiners prove they have met their obligation by turning in the RINs to the Environmental Protection Agency.

But instead of blending all the biofuels themselves, refiners also have the option to simply buy excess RINS from other refiners who have done extra blending. (Reporting by Timothy Gardner, editing by Jim Marshall)