Exactly, it's fungible, so you don't need to track specific gallons. The point isn't to track the specific molecules that represent one specific gallon, the point is to just track that a gallon was made and sold.

Nothing was made, nothing was sold, but he fraudulently tracked a creation and sale by creating the RIN.

How is this so difficult to imagine being games?

I "sell" you 10,000 barrels of fuel. Then I give you back 99% of your money. Rinse and repeat, you've generated lots of RINs with little capacity for anyone to catch you downstream. Contrast this with a carbon tax, where in order to legally generate revenue one must pay the tax.

RINs aren't generated when biodiesel is sold, they're generated when biodiesel is produced.

Affixing numbers to specific units of fuel is actually pretty much precisely what happened under US Interior Secretary Harold Ickes and the "certificates of clearance" oil production quota system implemented by DOI and the Texas Railroad Commission (it confusingly neither regulated railroads nor was called by the sensible acronym, it's referred to as the TRO). This system was in place from 1933 until 1972, and effectively regulated the global price and supply of oil over that period. Absent some initial hiccups and a slightly market disruption known as World War II, the result was a phenomenally stable price and match of oil to global demand from 1945 - 1973.

Daniel Yergin covers this in detail in chapter 13 of his truly epic history of oil, The Prize (1992).

https://www.worldcat.org/title/prize-the-epic-quest-for-oil-...

Also:

https://tshaonline.org/handbook/online/articles/mlc03

https://www.law.cornell.edu/uscode/text/15/715f

And a good, concise overview of the history here: http://www.reuters.com/article/2015/01/29/us-usa-crude-stock...

The RIN scheme makes sense. It allows a 10-percent industry wide requirement without requiring every company to mix 10% in its gas.