Capacity to produce biomass-based renewable diesel and other
biofuels, excluding biodiesel and ethanol, fell by about 299 million gallons
per year from June to about 4.60 billion gallons a year 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 billion pounds 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 million pounds in July, according to the data.
Demand for waste oils, fats and greases, such as tallow and
used cooking oil, rose to 1.43 billion pounds in July from 1.38 billion pounds
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 billion pounds of feedstocks per month, while biodiesel
producers would consume another 1.288 billion, if they were running at full
capacity, Capozzola said.
