Biofuels FAQs: Your Roadmap to Understanding the Market

With the ever-evolving biofuels market, questions around pricing, supply chain dynamics, regulatory changes, and future outlooks have become increasingly common. We’ve seen growing curiosity about what drives uncertainty in the market, how pricing for biodiesel and renewable diesel is impacted, and how both producers and consumers can adapt to these challenges. From shifting tax incentives and global trade dynamics to technological advancements and environmental programs, these factors are critical in shaping the biofuels landscape. To address these important topics and help you navigate the complexities, we’ve compiled this list of frequently asked questions and answers.

 

1. What drivers contribute to uncertainty in the biofuels market?

Uncertainty in the biofuels market is driven by several interrelated factors, the first of which is regulatory changes. Shifts in government policies, such as adjustments to the Renewable Fuel Standard (RFS), tax credits, and incentives, can create sizeable fluctuations in the market. These shifts are often tied to changes in political administrations, leading to inconsistent support for biofuel programs over time. Market demand is another significant driver, as it is influenced by oil prices, renewable energy preferences, and the growing adoption of electric vehicles, all of which can affect the production and pricing of biofuels.

Feedstock availability and pricing also play a  role in the market’s stability. The production of biofuels relies on raw materials such as corn, soybean oil, sugarcane, and other biomass. However, factors like weather conditions, agricultural yields, and competition with food production can cause prices and supply to fluctuate dramatically. Technological advancements further add to the complexity; innovations in biofuel production methods, like cellulosic ethanol and advanced biofuels, may disrupt existing market dynamics and shift investment priorities.

Environmental regulations add yet another layer of uncertainty, as increasing scrutiny over land use, greenhouse gas emissions, and water usage can result in stricter policies or influence public perception. Similarly, international trade policies, including tariffs and trade agreements, impact the import and export of biofuels and feedstocks, making market access and pricing less predictable. Economic conditions, such as recessions or periods of economic growth, also influence investments, consumer spending, and broader energy market trends.

The biofuels market must also contend with competition from other energy sources. The rapid growth of renewable alternatives, such as solar and wind, and advancements in battery technology for electric vehicles have placed biofuels under increasing competitive pressure. Public perception and advocacy further influence demand, as changing attitudes toward sustainability, environmental concerns, and health impacts can alter market dynamics. Lastly, natural disasters and climate change create additional volatility. Droughts, floods, and extreme weather events can disrupt agricultural production and supply chains, leading to price instability and supply shortages.

 

2. What main factors impact biodiesel and renewable diesel pricing?

Several interconnected factors influence the pricing of biodiesel and renewable diesel. Feedstock costs are one of the largest determinants, as these fuels rely on raw materials such as soybean oil, animal fats, and used cooking oil. The prices of these inputs fluctuate based on agricultural yields, weather events, and competing demands from food production. Production costs also play into pricing, as the processes to create biodiesel and renewable diesel involve expenses related to methanol, hydrogen, and electricity, which can vary depending on energy markets.

Renewable Identification Number (RIN) credit values significantly influence pricing as well. RINs are compliance credits under the Renewable Fuel Standard that drive demand for renewable fuels. Their value is subject to regulatory decisions, blending requirements, and overall market conditions. State-level programs, such as California’s Low Carbon Fuel Standard (CA-LCFS), Oregon’s Clean Fuels Program (OR-CFP), and Washington’s Clean Fuel Standard (WA-CFS), also contribute to pricing by creating incentives for lower-carbon fuels. Credit prices under these programs are dynamic and influenced by supply and demand.

Federal tax incentives provide additional support but introduce uncertainty. Programs like the Blender’s Tax Credit (BTC) and the Clean Fuel Production Credit (CFPC, also known as 45Z) offer financial relief, but their expiration or renewal can significantly shift pricing. State and local tax incentives, such as Illinois’ sales tax exemptions or Texas’ excise tax exemptions, further contribute to regional pricing variability. Additionally, the intended application of the fuel—whether for transportation or stationary equipment—impacts pricing due to differing logistical and operational requirements.

Lastly, the location of fuel delivery and the market dynamics between the origin and destination also affect costs. Transportation logistics, infrastructure availability, and regional supply and demand conditions are key in determining the final price of biodiesel and renewable diesel.

 

3. What primary factors are impacting the current U.S. biofuels market outlook?

The U.S. biofuels market outlook is shaped by a combination of bearish, bullish, and neutral or wildcard factors. On the bearish side, federal tax incentives are a concern. The Blender’s Tax Credit (BTC), which provides a $1 per gallon incentive for fuel blenders, expired on December 31, 2024. In its place, the Clean Fuel Production Credit (CFPC), offering up to $1 per gallon for U.S.-based renewable diesel producers, is began on January 1, 2025. However, the Treasury Department has not yet provided detailed guidance on how the credit will be calculated or who will be eligible, leading to continued uncertainty. Similarly, RIN credit values add to this bearish outlook. The EPA delayed its announcement of the Renewable Volume Obligations for 2026-2028 until late 2025, which will be under a new administration. Also, in early December the EPA proposed a partial waiver that would retroactively reduce the RVO for cellulosic biofuels for the 2024 compliance year. This potential retroactive change combined with the RVO delay creates uncertainty regarding blending requirements and demand for renewable fuels.

Conversely, there are bullish factors that may support the market. One of the most notable is the recent amendment to California’s Low Carbon Fuel Standard (CA-LCFS). The California Air Resources Board (CARB) has extended the program and made it more stringent, which is expected to drive further decarbonization efforts. While credit prices under the program are unlikely to rebound until Q4 2025 or later, the long-term outlook remains positive for incentivizing low-carbon fuels.

Neutral and wildcard factors add additional layers of complexity. Tariffs on foreign biofuel feedstocks remain an ongoing consideration, as they can disrupt global supply chains and influence domestic production costs. Additionally, U.S. biofuel producers are increasingly exploring export opportunities. Policies and incentives in Europe and Canada have created a competitive global landscape, encouraging U.S. producers to shift supply to international markets.

 

4. Are biodiesel and renewable diesel both impacted by these factors?

Yes, biodiesel and renewable diesel are both impacted by the factors influencing the biofuels market. Both fuels rely on many of the same feedstocks, such as soybean oil, animal fats, and used cooking oil, which makes them equally vulnerable to fluctuations in raw material availability and pricing. Both fuels are incentivized through many of the same federal and state programs, including RIN credits, the Blender’s Tax Credit, and Low Carbon Fuel Standards. As a result, changes to these incentives, regulations, or market conditions have similar impacts on both fuels, creating shared challenges and opportunities for producers and consumers alike.

 

5. What is Mansfield doing to address the various factors contributing to market volatility?

Mansfield is actively addressing biofuel market volatility through several strategic initiatives. To mitigate risks associated with supply disruptions and price fluctuations, Mansfield has diversified its supply sources by building relationships with multiple suppliers. This ensures greater flexibility and security in sourcing biofuels. Mansfield also invests heavily in market research and analysis to monitor trends, regulatory updates, and technological advancements, allowing the company to adapt quickly to changing market conditions.

Supply chain investments are another priority. Mansfield has established renewable diesel storage positions, which provide greater security of supply while offering transparency in carbon intensity metrics. These investments help customers meet their sustainability goals and navigate the low-carbon fuels landscape more effectively. Additionally, Mansfield remains deeply engaged with industry stakeholders, research institutions, and advocacy groups, fostering collaboration to stay ahead of emerging trends.

Consumer education and marketing are key components of Mansfield’s approach. By promoting awareness through information-sharing platforms and organizing initiatives like fuel consortium opportunities, Mansfield empowers end-use customers to make informed decisions and manage their biofuel needs effectively.

 

6. What can you do to help navigate a complex biofuels market?

To successfully navigate the complexities of the biofuels market, you play an important role by maintaining open communication with Mansfield or your fuel supplier. By providing timely updates on changes to fueling needs, such as site locations, volume demand, blending requirements, and equipment usage expectations, customers help Mansfield anticipate and address supply chain challenges. Customers are also encouraged to communicate any specific feedstock or carbon intensity requirements to ensure their needs are met efficiently.

Additionally, customers can stay informed and engaged by participating in Mansfield’s educational and industry-focused initiatives. Subscribing to FUELSNews and FUELSCast provides valuable insights into market trends and regulatory changes. Attending Mansfield events, such as Sustainability Summits, offers opportunities to learn, network, and engage with experts in the low-carbon fuels industry. By actively joining these conversations, you can better understand the evolving landscape and position your organization to adapt to changes effectively.

Talk to the Expert

If you are a fleet looking for a greener solution to fuel up your vehicles, reach out to Mansfield today to discover a full range of products and services designed to help you meet your sustainable goals.