A flood of U.S. renewable diesel plants set to come online in the next three years will not be enough to offset the loss of petroleum diesel refining capacity from plant closings since 2019, a Reuters analysis of federal data shows, said Hydrocarbonprocessing.
U.S. refining capacity has declined in the last two years, as plants shut during the outset of the coronavirus pandemic, causing prices to spike. Several plants are being converted to facilities that can produce cleaner-burning renewable diesel, but at least for now, those facilities will not fully replace those refined barrels.
There are at least 12 renewable diesel projects worth more than $9 billion under construction, with another nine proposed. The 12, along with existing plants, are expected to produce about 135,000 bpd of renewable diesel by 2025 according to EIA data, from around 80,000 bpd now.
However, since 2019, diesel production capacity has dropped by about 180,000 bpd total, according to the U.S. Energy Information Administration, and at least one more U.S. refinery is set to close next year, further reducing output. In addition, those refiners set to produce renewable diesel will also no longer produce gasoline or jet fuel.
Globally, about 400,000 bpd of combined diesel, jet fuel and fuel oil capacity has been lost since 2019, according to calculations from EIA data.
Renewable diesel is made from animal fats, food wastes and plant oils but is chemically equivalent to petroleum-based diesel. It can be produced in existing refinery equipment, but the yield are lower than with diesel. Biodiesel, another plant based diesel, must be mixed with petroleum to operate effectively in most engines, though some truck fleets can run on 100% biodiesel.
Growing demand and refinery losses have pushed diesel prices to record levels. The retail price of U.S. diesel has surged 80% this year to USD5.78 a U.S. gallon, and low inventories have raised the potential for shortages. U.S. stocks of distillates, including diesel, are down 19% from a year ago.
About 1 MMbpd of new petroleum refining capacity is planned in the next five years in Asia, the Middle East and on the U.S. Gulf Coast. But experts say startups are difficult to predict due to construction delays, changes in market demand and financing.
As per MRC, U.S. refiners last month imported the most heavy crude in nearly two years, customs data showed, as they cranked up motor fuel production and sought to replace sanctioned Russian oil. Higher heavy-crude imports are common in summer-driving months, but this year's increase comes as the Biden administration is calling on for refiners to ramp up output and shave profit margins to ease soaring prices. The administration has asked for a parley to explore further efforts.
mrchub.com