U.S. biomass-based diesel imports down for second consecutive year in 2018
U.S. imports of biomass-based diesel, which include biodiesel and renewable diesel, totaled 22,000 barrels per day (b/d) in 2018, down 42% from 2017, and 64% lower than the all-time high set in 2016. Although increasing Renewable Fuel Standard (RFS) targets have driven biomass-based diesel demand in recent years, imports have fallen sharply—largely because of U.S. Department of Commerce (DOC) import duties imposed on foreign biodiesel volumes sourced from Argentina and Indonesia, countries which made up 60% of total U.S. imports of biomass-based diesel in 2016.
Biodiesel is a mixture of chemical compounds known as alkyl esters and is often combined with petroleum diesel in blends of 5% to 20%, or B5 to B20. Renewable diesel is composed of hydrocarbon chains that are indistinguishable from petroleum diesel, meaning that it meets specifications for use in existing infrastructure and diesel engines and is not subject to any blending limitations. Biodiesel and renewable diesel are produced from a variety of fats, oils, and grease, collectively referred to as FOGs.
Because biomass-based diesel typically costs more than petroleum diesel, consumption of biomass-based diesel is largely driven by federal and state policies. At the federal level, biomass-based diesel qualifies as an advanced biofuel under the U.S. Environmental Protection Agency’s RFS program, which mandates the blending of renewable fuels into the nation’s fuel supply. Biomass-based diesel also generates credits under California’s Low Carbon Fuel Standard (LCFS) and is increasingly used to meet the tightening fuel standards in the LCFS given its favorable greenhouse gas reduction score.
When DOC announced its anti-dumping and countervailing investigations in March 2017, U.S. imports of biodiesel from Argentina decreased from 29,000 b/d in 2016 to 19,000 b/d in 2017 and fell to zero in 2018. Indonesia did not export any biodiesel to the United States during 2018.
With the elimination of imports from Argentina and Indonesia, Canadian biodiesel volumes made up most of U.S. imports in 2018, totaling 5,000 b/d, with the remainder coming from European countries. Overall, U.S. imports of biodiesel totaled 11,000 b/d in 2018, a 58% decrease from 2017 levels and 76% below the record level set in 2016.
U.S. biodiesel production has increased in the last two years largely as a result of the decrease in imported biodiesel in the face of increasing RFS targets for biomass-based diesel. U.S. biodiesel production reached 102,000 b/d in 2016, rose slightly in 2017, and rose again in 2018 to reach a record of nearly 121,000 b/d, or nearly 1.9 million gallons.
Renewable diesel imports have been sourced exclusively from Singapore since 2015 and totaled 11,000 b/d in 2018. All U.S. renewable diesel imports enter the country in California, most likely for compliance in the LCFS, as renewable diesel has one of the lowest carbon intensities of the approved pathways for LCFS compliance. Total U.S. renewable diesel imports have fallen over the last two years largely as a result of operational constraints at the main renewable diesel production facility in Singapore.
U.S. exports of biodiesel totaled nearly 7,000 b/d in 2018, an increase of 10% over the total in 2017. Canada receives nearly 80% of the U.S. exports of biodiesel, much of which is produced in the Midwest region where most U.S. production capacity exists. The trade balance of biodiesel between the United States and Canada is nearly equal. Canadian biodiesel has regularly been exported to the United States to capture tax incentives and meet U.S. renewable fuel programs, and imports of U.S. biodiesel account for any shortfall in Canadian biodiesel demand.
In its latest Short-Term Energy Outlook (STEO), EIA expects that continuing import duties will lead to similar reduced levels of biomass-based diesel imports and increasing domestic biodiesel production volumes through 2019. Net imports of biomass-based diesel are forecast to be 300 million gallons (about 20,000 b/d) in both 2018 and 2019, while U.S. biodiesel production is expected to increase by 21% in 2019 and 10% in 2020 to reach a level of 2.4 billion gallons (156,000 b/d).
Principal contributors: Sean Hill, Neil Agarwal