Renewable Diesel Saturation

U.S. fuel makers rushed to produce renewable diesel, leading to a supply glut and lower profits. This oversupply could hinder future biofuel investments and slow the transition from fossil fuels. Renewable diesel production capacity quadrupled since 2021, exceeding demand. Government mandates and tax credits are crucial for the industry, but blending targets are lower than current production. The oversupply has also driven down prices of Renewable Identification Numbers (RINs), credits refiners earn for producing biofuels. Despite these challenges, some companies have shown remarkable resilience, either by shutting down or scaling back production, or betting on outlasting the competition. The excess supply is expected to be exported to Canada and Europe, but these markets have their producers. Next year, a shift in tax credits may help alleviate the oversupply by disincentivizing imports. The renewable diesel industry is facing challenges, but the resilience of some companies is a testament to its potential.

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