Lockdowns, curfews, and fewer people eating out due to the coronavirus are dwindling the supplies of used cooking oil that is used in renewable fuels production, and refiners are now racing to procure feedstocks for biodiesel in California, Bloomberg reports.
Supplies of used cooking oil and animal fats from restaurants have slumped this year, while some of the largest U.S. oil refiners have announced plans to convert oil refineries into biofuel producing sites.
California has a state-level program to support renewable diesel production as part of its policies to cut emissions from transportation.
As fuel demand and oil prices collapsed in the pandemic earlier this year, refiners began to announce plans for new renewable fuels production. Phillips 66, for example, said in August that it plans to reconfigure its San Francisco Refinery in Rodeo, California, to produce renewable fuels. The plant would no longer produce fuels from crude oil, but instead would make fuels from used cooking oil, fats, greases, and soybean oils. Phillips 66 expects to produce 680 million gallons annually of renewable diesel, renewable gasoline, and sustainable jet fuel.
Marathon Petroleum Corporation applied last month for permits to convert its Martinez, California, refinery to a renewable diesel facility. If the project is commissioned, the facility is expected to start producing renewable diesel in 2022, with a plan to reach full capacity in 2023.
However, the significantly decreased used cooking oil supply could threaten some refinery projects, analysts tell Bloomberg.
Phillips 66 recognizes the challenge of securing supply for its San Francisco facility, but the site has access to ports so it could bring in supplies from outside California, company spokesman Joe Gannon told Bloomberg.
The lower used cooking oil supplies are also raising the price, which in turn reduces refining margins.
“Biofuel producer margins have come under pressure due to the reduced demand, low oil prices and supply disruptions affecting some feedstocks. Prolonged low margins could lead to a wave of industry consolidation,” BNEF said in an analysis in June on how COVID impacts the biofuels industry.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
- The Road To Recovery Is Long For Oilfield Services
- Is This The Key To Cheaper Solar Power?
- M&A Heats Up In Canadian Oil Patch