Rystad Energy sees negative outlook for biofuel production volumes

In Washington, most US biofuel production numbers are clearly on track to end the first quarter of this year in negative territory either on a quarter-over-quarter or year-over-year basis, Rystad Energy analysis suggests. The US Environmental Protection Agency (EPA) published the updated statistics for the Renewable Fuel Standard (RFS) program on March 20 covering the supply, trade and price dynamics for February 2025. Similar to previous months, we still observe uncertainty around future biofuel policy starts having a tangible impact on the actual supply for nearly all bio products.

Production of US domestic renewable diesel – mainly hydrotreated vegetable oil (HVO) – declined sharply in January to around 167,000 bpd. Preliminary February 2025 data show it was even weaker at 130,000 bpd. We note that the final number can end up around 20% higher after the reporting is complete, but it is already quite clear that HVO supply is on track for a very significant drop in the first quarter of this year. A prolonged period of weak biomass-based diesel renewable identification number (D4 RIN) margins coupled with the persistent uncertainty around 45Z clean fuel tax credit rules under the new US administration have pushed HVO operators towards temporary shut-ins and reduced utilization rates of existing capacity.

When it comes to sustainable aviation fuel (SAF) supply, last year this acted as a temporary solution as HVO operators were able to increase the share of SAF in the end-product mix to partially hedge against HVO oversupply. Some hope for SAF supply prospects was triggered by relatively robust January 2025 RIN generation numbers as some additional SAF deliveries from P66’s Rodeo Renewed facility in California pushed the three-month moving average SAF supply in the US up after a very weak fourth quarter of last year. Having said that, February 2025 supply numbers once again came in weak, with zero generation coming from foreign producers supplying the US market, such as Neste.