Renewable diesel, derived from animal fats and plants, is becoming the preferred choice for heavy vehicles in major cities like New York City and California. In a significant announcement, New York City officials have declared that by the end of June, their fleet of heavy vehicles, including garbage trucks and ambulances, will be powered by renewable diesel. The city’s commitment to this fuel is evident in their willingness to pay a premium for it. The first shipment of renewable diesel, transported by barge from Louisiana in September, cost $4.81 per gallon, compared to the retail price of $4.59 per gallon for regular diesel at the time.
In California, biofuel already accounts for more than half of the diesel consumed. The state has successfully implemented a low-carbon fuel standard, which has been instrumental in promoting the use of biofuels. Other states such as Oregon and Washington have also adopted similar standards that require carbon-emitting entities to purchase credits to offset their emissions.
The supply of renewable diesel has been rapidly increasing in recent years. In fact, U.S. plants are projected to produce three billion gallons of renewable diesel annually by the beginning of 2023. This marks a significant increase from 1.75 billion gallons in 2022 and 791 million gallons in 2021. Notably, Italian energy company ENI and U.S. refiner PBF Energy recently opened a new plant in Louisiana, set to achieve an annual production capacity of 300 million gallons. Additionally, Marathon Petroleum is nearing completion of a 730-million-gallon facility in California through its partnership with Finland’s Neste.
The rapid growth in supply has created a challenge as it outpaces demand, resulting in declining margins and share prices for biofuel producers such as Darling Ingredients and Neste. However, there is optimism that California will accelerate its efforts to reduce carbon emissions, potentially giving rise to a new market for renewable jet fuel.
Last Week’s Market Highlights
- Gold prices surged to new highs, while Bitcoin reached a milestone by surpassing $44,000, representing a remarkable 166% increase for the year.
- Moody’s downgraded China’s credit rating from stable to negative.
- The stock market experienced volatility, initially declining and then rebounding. Oil and Treasury prices also rose during this time.
- Mortgage rates continued to decline, and November job numbers showed an increase of 199,000, driven in part by resolved strikes.
- In a rather subdued week, the Dow Jones Industrial Average saw a marginal increase of 0.01%, the S&P 500 rose by 0.21%, and the Nasdaq Composite gained 0.69%.