How Biofuels Are Keeping Refiners Running Amidst the Pandemic

As the coronavirus pandemic continues to wreak havoc on the economy, most oil refiners have discovered new alternative ways to tackle the challenge of decreasing demand for gasoline to stay afloat during these uncertain times. One such practice is producing biofuels derived from animal fat and cooking oil. Refiners opt for biofuel that comes with the much-needed government credits to supplement inconsistent revenues as the pandemic continues its upsurge. Gasoline demand also continues to plummet further as government restrictions to contain Covid-19 intensifies.

New Innovation

S&P Global Patts states that refining companies turned to biofuels to avert bankruptcy and continue running amidst the pandemic. Already, new biofuels plants are in operation, with nearly 20 projects in the planning phase.

Some of these projects are located on the West Coast, and biofuels refiners have set up California and Oregon markets. To meet federal requirements for combining renewable fuels such as ethanol, refiners are selling at $3.50 a gallon. This enables them to earn state and federal credits, which they can then sell to other refiners. In California, the price of biofuels is about $3.30 a gallon.

The innovation is rapidly gaining momentum across other states which are keen on embracing low carbon file standards. Analysts have projected new advanced fuel production to 5 billion gallons per year by 2025. This would translate into 8 percent of the current diesel production.

Tough Times

This year, top US oil refiners have recorded a sharp slump in revenue and overall financial performance going into billions of losses. According to financial research company Bloomberg, Washington — based companies like Philippines 66 is projected to post a $2.3 billion loss. Meanwhile, last month, San Antonio established Valero posted its third-quarter loss of over $460 million. The renewable diesel operations earned the company $184 million in operating income and prevented the number from rising.

Simultaneously, advanced biofuels have gained significant popularity over the years as world industries tackle climate change by cutting greenhouse gas emissions. This has seen an upsurge in the production of advanced renewable biofuels such as diesel and jet fuel in 2020 alone.

The Environmental Protection Agency indicates that production has grown by over 278 million gallons in September 2020, coming at 44 percent. As the pandemic continues to keep many restaurants closed, it is becoming increasingly difficult to source cooking oil. This has motivated refiners to try innovations like producing fuel from tree trimmings and municipal waste to reduce carbon footprint and increase feedstock.

The innovations have sparked various reactions from investors and consumers who are curious about whether refiners will stick to biofuels and continue advancing it once the Covid-19 vaccine becomes available and businesses, including demand for diel, resume normal operations.

John Kaweske is a Colorado Springs-based entrepreneur focused on sustainability, biotechnology, and renewable energy. http://johnkaweske.org