Mumbai, 21 Jun (Commoditiescontrol):The Biden administration has drawn ire from the bio and renewable diesel industry with the imposition of federal quotas on fat-based fuels. These quotas, which dictate the amount of renewable fuels incorporated into US gasoline and diesel supplies, have been met with controversy by multiple stakeholders.
The Environmental Protection Agency (EPA), under the newly finalized regulation for 2023, has mandated the use of 2.82 billion gallons of biomass-based diesel, mainly derived from soybean and canola oil. This represents only a 2.2% increase from 2022's mandate of 2.76 billion gallons. For the years 2024 and 2025, quotas have been set at 3.04 billion and 3.35 billion gallons respectively, with the EPA aiming for 22.33 billion gallons of renewable fuel to be mixed into gasoline and diesel supplies by 2025.
However, these requirements have drawn sharp criticism from biofuel producers who argue that the recent boom in US production justifies higher targets. They assert that substantial investments in renewable diesel capacity may be compromised.
The new quotas have led to bipartisan backlash from oil refiners, agricultural entities, and ethanol and biodiesel producers, as well as rural farm interests. This reflects the longstanding tension between the oil refining and agricultural sectors in the US. Despite President Biden's campaign promise to promote corn-based ethanol, his administration's focus on electric vehicles raises questions about the future of the market for all liquid fuels, regardless of their source.
In addition, the EPA has capped the conventional ethanol volume that can be used to meet quotas in 2024 and 2025 at 15 billion gallons per year, down from the proposed 15.25 billion gallon target. This is a blow to corn-based fuel manufacturers.
The recent surge in CBOT futures, fueled by short-covering, was driven by expectations of increased US biofuel consumption, which in turn would boost demand for soy oil, a key feedstock. However, despite a considerable expansion in US soybean processing capacity, the anticipated increase in biodiesel consumption due to EPA mandates, coupled with demand from the food industry, is insufficient to offset the burgeoning soybean supply. This supply-demand imbalance could lead to another significant dip in soy oil prices.
(By Commoditiescontrol Bureau: 09820130172)
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