BOTTOM LINE UP FRONT: The Renewable Fuel Standard (RFS) is working against lower fuel prices, contributing an extra 36-40 cents per gallon at the pump. When the price of petroleum diesel falls, it puts upward pressure on D4 RIN prices, increasing RFS compliance costs for refiners. Washington should end this mandate-fueled market chaos and reform the RFS, rather than compounding pressure and spiking prices across America's fuel supply chain.
KEY POINTS:
-
The Renewable Fuel Standard adds more than 30 cents per gallon of gasoline and diesel.
-
The price of RINs – RFS compliance credits refiners must purchase – fluctuates drastically with market conditions.
-
Ironically, the RFS will act to partially offset a drop in diesel prices. When petroleum diesel prices fall, and the costs for feedstocks needed to make renewable diesel stay the same, D4 RIN values need to rise because the economics of producing renewable diesel worsen.
-
Stated differently, the high cost of making renewable diesel requires taxing petroleum diesel more to make renewable diesel economic. The EPA previously projected that renewable diesel would cost $2.15 more per gallon than petroleum diesel, but the actual difference is now closer to $2.52.
DEEP DIVE:
The ethanol requirement of the Renewable Fuel Standard, the nation’s biofuel mandate, is unachievable due to engine and infrastructure limitations. Physical infrastructure constraints make it impossible for Environmental Protection Agency (EPA)-mandated volumes of ethanol to be blended into the gasoline supply. The maximum amount of ethanol that can be blended into the gasoline supply is around 10 percent of the gasoline pool; a limit referred to as the “blend wall.”
As a result, to comply with the ethanol portion of the regulation that is unachievable, the RFS allows refiners to over-comply with the advanced biofuel standard, which mandates biomass-based diesel to be mixed into the petroleum diesel pool, to to fill the gap. However, renewable diesel is more expensive than petroleum diesel.
Renewable diesel costs roughly $4–5 a gallon more to produce. In fact, it’s only economical to produce renewable diesel by stacking D4 RINs with the federal 45Z tax credit and the Low Carbon Fuel Standard (LCFS) credit in markets like California. The EPA’s own 2026 regulatory analysis notes: “D4 RINs are priced to account for the price difference between biodiesel and petroleum diesel…Other factors can also impact this relationship; most significantly are the presence or absence of the biodiesel tax credit and the impact of other subsidies and credits (e.g., state LCFS credits).”
As a result, the D4 RIN effectively becomes a balancing mechanism, closing the economic gap. Renewable diesel is more expensive to produce due to feedstock and production costs. When soybean oil – the key ingredient or feedstock used to make renewable diesel – is more expensive than regular diesel, the price of D4 RINs rises to offset the cost difference. Again, we can see the correlation in EPA’s own 2026 regulatory analysis, which found that “the prices for soybean and other vegetable oil feedstocks were unusually high from the summer of 2021 through the summer of 2023, a period [that] corresponds to the period of high RIN prices for D4, D5, and D6 RINs.”
When petroleum diesel prices fall, D4 RIN prices automatically rise to offset that drop. The program functions as an escalating tax on petroleum diesel that gets larger as diesel gets cheaper. This means that lower wholesale diesel prices trigger even higher RFS compliance costs, increasing consumer diesel costs when RINs are already adding 36-40 cents per gallon.
Effectively, the RFS has a built-in mechanism that neutralizes diesel price relief. Any policy that lowers the cost of wholesale diesel triggers a costly offset on top of the 36–40 cents per gallon the program already adds to consumer fuel prices. And now, renewable diesel producers are making higher margins on renewable diesel than petroleum diesel.
BOTTOM LINE: While Congress pushes for policies that will drive prices higher, the White House and the EPA should take executive action to reform the RFS and bring down gas and diesel prices. Otherwise, the RFS will continue to manipulate markets and drive higher costs across the supply chain. Fixing the RFS would deliver immediate, nationwide relief to consumers without risking American fuel supplies.
