As part of the attempt to move to a greener world, the federal government requires refiners to mix ethanol into gasoline. Those that do mix receive credits which they can sell to those companies that don't mix ethanol. These credits have become a hot item this year; in January they could be bought for 7 cents each, by July the price was $1.43, it has slipped to 60 cents today.
The rise has come about because the government mandates for ethanol use assumed a growing demand for gas, but with the Great Recession and more fuel-efficient cars the demand has not grown as expected. So, the amount of ethanol the government is
requiring refiners to use is close to the maximum amount that can be blended
into gasoline without creating problems for gas stations and motorists. Therefore, the credits have become more valuable.
You need not be a refiner to buy or sell credits. Perhaps it was chance or maybe the big banks were prescient, but they seemed to have acquired millions of credits in the past few years. Now they can sell them at a significant profit. And best of all, they are not sold on a reasonably public exchange; sales are private affairs and you don't need to be licensed to trade.
This is just one more example of the banks being involved in more than banking.
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