U.S. renewable diesel production capacity posts largest monthly decline on record
U.S. renewable diesel production capacity declined in July by the most since the industry began its rapid expansion three years ago, data from the U.S. Energy Information Administration (EIA)showed on Monday.
Capacity to produce biomass-based renewable diesel and other biofuels, excluding biodiesel and ethanol, fell by about 299 million gallons per year (MMgal/yr) from June to about 4.60 Bgal/yr in July, the second time it has declined since the EIA began keeping records in 2021.
Well-established oil refiners and startups have made large bets on renewable diesel in recent years as government mandated consumption targets and subsidies lowering costs of production have encouraged investments in supply growth. However, output from new plants is starting to outpace demand, leading to a glut in the market.
Vertex Energy, one of the newest entrants in the U.S. renewable diesel industry, filed for Chapter 11 bankruptcy protection last week, just months after it paused output of the biofuel, citing macroeconomic weakness.
Demand for vegetable oils as feedstock for renewable diesel production, which include canola oil, corn oil and soybean oil, fell more than 5.6% from June to 1.168 Blb in July, the EIA data showed.
Demand for the same feedstocks from facilities producing biodiesel, which is blended into petroleum-based fuel to lower emissions, rose 5.6% from June to 866 MMlb in July, according to the data.
Demand for waste oils, fats and greases, such as tallow and used cooking oil, rose to 1.43 Blb in July from 1.38 Blb in June, the data showed.
Those consumption levels indicate biofuel producers are running their plants below capacity, said Zander Capozzola, vice president of renewable fuels at AEGIS Hedging.
At current capacity, renewable diesel plants could burn through at least 3.162 Blb of feedstocks per month, while biodiesel producers would consume another 1.288 Blb, if they were running at full capacity, Capozzola said.
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