A "somewhat meager rally" may be underway for spot gasoline prices, but oil market expert Tom Kloza said lower corn prices are causing "radical changes" for ethanol, and even for Renewable Identification Numbers, the currency of ethanol market tax credits.  

As a result, the price of finished gasoline remained under pressure nationwide, said Kloza, chief oil analyst for GasBuddy.com, now owned by OPIS, the highly respected oil market publication for which Kloza has written for years.

Spot ethanol in Chicago was $1.90 per gallon Wednesday, reflecting what Kloza called "a whopping" 21.5 cents-per-gallon drop from Tuesday's close. October ethanol futures on the Chicago Board of Trade traded at lower than $1.79 per gallon, and January 2014 futures moved to as little as $1.56 per gallon. 

"The drop occurred thanks to a continuing slump in corn prices, together with a rise in ethanol output that puts production some 11.5 percent above last year," Kloza said in an email. 

Corn prices hit a three-year low this week. “It's amazing what a little new-crop corn or corn availability can do,” Garrett Toay, founder of Toay Commodity Futures Group LLC in Clive, Iowa, told Bloomberg News.

Not since June 15, 2012, has ethanol closed below $2 per gallon, and it wasn't since mid-August 2010 that is closed below $1.90, Kloza said. "So (Wednesday's) numbers reflect a truly historic return to some price levels not seen since $3/gallon retail gasoline was an oddity and not a U.S. benchmark," he said.

Meanwhile, the value in some transactions for RINs were confirmed at 39 to 40 cents, now more than $1 below the peaks of a little more than two months ago, Kloza said.

For E10 blenders in the Midwest, given Chicago conventional blendstock assessed at $2.55 per gallon by OPIS at midday Wednesday, adding 10 percent ethanol at $1.90 per gallon would lead to a finished price of about $2.485 per gallon, and the RINs generated ostensibly could reduce the price by another 3.9 cents, Kloza said. 

"So, it is conceivable that some E10 racks (wholesale prices) in the upper Midwest could slump to $2.45/gallon or less," he said.