Carl Icahn: If Oil Refiners Crash, So Will The Economy

In a new piece for the Wall Street Journal, legendary activist investor and Icahn Enterprises LP IEP CEO Carl Icahn discussed the rampant “manipulation, speculation, and fraud” going on within the U.S. oil refining industry. Icahn claims that the 2005 Renewable Fuels Standard legislation has created an unintended financial market in Renewable Identification Numbers (RINs) that is threatening the U.S. economy.

RINs are electronic credits created when oil companies blend renewable fuels, such as ethanol, with gasoline and diesel fuel. These credits were intended to incentivize the use of alternative fuels.

Artificial Inflation And Subsequent Fall Out Potential

Icahn said participants in this market have artificially inflated the price of RINs from $0.01 in 2012 to nearly $1. As a result, smaller merchant oil refiners, which have no choice but to purchase RINs to adhere to fuel standards, are getting bled dry.

“If merchant refiners go under, the Big Oil oligopolies will be strengthened and gasoline prices will go up, with ripple effects throughout the economy – lower consumer spending, decreased travel, higher shipping costs, increased unemployment, labor market monopsony, decreased consumer confidence, higher food prices, and led public funding for priorities like education,” Icahn explained.

Icahn is a large investor in CVR Refining LP CVRR, which is down 60.1 percent in the past three years.

Bloomberg reports that CVR and other U.S. refiners such as Valero Energy Corporation VLO, PBF Energy Inc PBF, HollyFrontier Corp HFC and Calumet Specialty Products Partners, L.P. CLMT will spend roughly $1.8 billion on compliance in 2016.