U.S. renewable diesel production capacity experienced its largest drop since the industry began its rapid expansion three years ago, according to data released by the Energy Information Administration (EIA) on Monday.
Capacity to produce biomass-based renewable diesel and other biofuels, excluding biodiesel and ethanol, decreased by approximately 299 million gallons per year from June, settling at about 4.60 billion gallons in July. This marks the second decline recorded by the EIA since it began tracking these metrics in 2021.
The EIA did not provide immediate insights into the factors contributing to this decline. Despite the recent surge in investments by established oil refiners and startups, spurred by government-mandated consumption targets and subsidies, the market is now facing an oversupply as production from new plants begins to outstrip demand.
Vertex Energy, one of the newest players in the U.S. renewable diesel sector, recently filed for Chapter 11 bankruptcy protection, just months after it halted production of the biofuel, citing broader macroeconomic challenges.
EIA data indicates that demand for vegetable oils used as feedstock for renewable diesel, including canola oil, corn oil, and soybean oil, dropped over 5.6% from June to 1.168 billion pounds in July. Conversely, demand for these feedstocks from biodiesel facilities—blended into petroleum-based fuel to reduce emissions—rose by 5.6%, reaching 866 million pounds in July.
Additionally, demand for waste oils, fats, and greases, such as tallow and used cooking oil, increased to 1.43 billion pounds in July, up from 1.38 billion pounds in June. These consumption levels suggest that biofuel producers are operating their plants below capacity, according to Zander Capozzola, vice president of renewable fuels at AEGIS Hedging.
At current production levels, renewable diesel plants could potentially process at least 3.162 billion pounds of feedstocks per month, while biodiesel producers could consume an additional 1.288 billion pounds if operating at full capacity.
