MARKETS

Ethanol is a renewable fuel primarily derived from starch and sugar based feedstocks.   

These starches and sugars are fermented and distilled to produce ethanol, which in turn is blended in over 95% of all U.S. gasoline. Domestically large scale ethanol production predominantly consists of corn, but other feedstocks such as sugar beets, sugar cane, algae and wood are also used to produce this biofuel.

In an effort to reduce greenhouse gas emissions and decrease domestic reliance on foreign oil, Congress created the renewable fuel standard (RFS 1). 

With the enactment of the Energy Policy Act of 2005, RFS 1 was authorized to mandate a minimum of 4 billion gallons of renewable fuel to be used in the nation’s gasoline.

Two years later the biofuel’s decree outlined in the initial RFS was superseded by the Energy Independence and Security Act of 2007. What became known as RFS 2, increased the mandated usage volumes, and extended the period over which the volumes ramp up through at least 2022.

The Environmental Protection Agency (EPA), administers both RFS1 and RFS 2 and established detailed compliance standards. The EPA did this by instituting a tracking system based on renewable identification numbers (RINs) with credit verification and trading provisions for treatment of small refineries, and general waiver provisions.

LCFS works with such programs as Cap and Trade, Advance Clean Car, and SB 375 to reduce transportation greenhouse gas (GHG) emissions.

The primary goal of the LCFS is to reduce the carbon intensity (CI) of transportation fuel used in California by at least 10% by 2020 from a 2010 baseline.

Although the LCFS takes stringent measures to reduce greenhouse gas emissions in California, the program has other significant benefits. It mitigates petroleum dependency while attempting to improve air quality, while transforming and diversifying the transportation fuel pool in California. The program aligns with preceding state legislation addressing air quality and climate change.

The LCFS applies to all transportation fuel that is sold, supplied, or offered for sale in California. The program also applies to any entity responsible for that transportation fuel in a calendar year.

Regulated parties inside California, as well as exempt providers of clean fuels that meet 2020 targets can opt into the program and participate in the credit market.

Low Carbon Credit Generating Fuels and Blend stocks include: bio-based natural gas, fossil natural gas, hydrogen, electricity, ethanol, biomass-diesel and renewable diesel.

High Carbon Deficit Generating Fuels and Blend stocks include: California Reformulated Gasoline Blend stocks for Oxygenate Blending (CARBOB) and California Diesel Fuel.

OGB has seasoned brokers that can help navigate the North American rail lease market. 

We specialize in locating and placing DOT 111 as well as DOT 117 rail cars into ethanol, methanol or crude service. On a macro basis, the tank car market is currently experiencing unique challenges as both lessors and lessees struggle with price discovery.

On a micro level opportunities still exist; however, they are often harder to uncover and can be difficult to close. Regardless of your immediate or future logistic ambitions, OGB will keep you dialed in and in touch with current market conditions.