By Sara Bonario, Director of Supply, Guest Contributor
The availability of biodiesel for transportation fuel blending in Midwest production markets is strained this summer, with July and August truck availability limited or completely sold out. This is the case, even as the cost of on-road diesel and diesel blends with 20% biodiesel are setting record levels at retail pumps.
There are many underlying factors causing this situation. The most obvious is that demand for soybean oil, historically the primary feedstock for biodiesel production, is on the rise from non-traditional buyers. Major refiners such as Marathon, Chevron, and P66 invested in converting large-scale petroleum refineries into renewable fuel production sites. These sites utilize soybean oil as a primary feedstock to produce renewable diesel, a drop-in replacement for petroleum diesel, and sustainable aviation fuel.
This increased demand for soybean oil has caused prices to rise. Biodiesel producers find themselves forced to evaluate the economics of selling their soybean oil feedstock and avoiding the costs associated with producing and storing biodiesel until it can be shipped out of the plant. The demand for soybean oil from refiners has been described as “overwhelming” in a recent conversation with an integrated biodiesel producer who noted that refiner demand is very ratable and not constrained by cold weather.
The competition for feedstocks is likely to increase as the U.S. and the world continue to move toward renewable transportation fuels. The lesson for over-the-road blenders of biodiesel into petroleum diesel is to plan ahead and secure your supply well in advance.