Viewpoint: Biodiesel output relies on HOBO as RINs fall
The US biodiesel industry is relying on stronger production margins to maintain output as the value of renewable credits hovers near three-year lows.
Biodiesel production levels reached 16.31mn bl in the first five months of 2018, according to data from the US Energy Information Administration (EIA), which is about 21pc higher than the same period in 2017. The increase in output comes after Argentina and Indonesia were slapped with antidumping duties by the US in August 2017.
Producers have mainly benefited from a wider heating oil/soybean oil (HOBO) spread, which has reached levels not seen since 2014. The HOBO spread hit a high of +7¢/USG on 26 July, up 52¢/USG from -45¢/USG at the beginning of 2018. Ultra-low sulfur diesel (ULSD) prices are at four-year highs as crude prices remain supported by Opec countries' reduced output. Soybean oil prices are at levels not seen since late 2015 amid the ongoing trade dispute between the US and China.
Yet the release of the US Environmental Protection Agency's (EPA) 2019 renewable volume obligations (RVO) did not account for small refinery hardship waivers granted to 29 refineries. The agency has estimated there is a total of 3.06bn carryover RINs, about 15pc of the total 2019 RVO and 840mn RINs more than what was anticipated when the 2018 RVO levels were set. The waivers have put intense pressure on the value of biomass-based diesel D4 RINs, which has curbed incentives for increasing biodiesel blending. Under the proposed 2019 RVO, blending obligations will increase 3.1pc to 19.88bn USG, but that has not been enough to limit losses on RIN values.
Following the EPA's proposal, the latest Short-Term Energy Outlook released by the EIA lowered the agency's forecasted biodiesel production for 2018 by 6,000 b/d to average 131,000 b/d. The forecast for 2019 output was lowered by 5,000 b/d to an estimated 144,000 b/d.
Blending economics could see a significant boost in profitability with the reinstatement of the blenders' tax credit (BTC). Industry trade groups have joined forces recently to concentrate lobbying efforts on congressional leaders for an extension to the BTC, which was retroactively established for 2017 but not 2018.
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UK bitumen production at highest since July 2021
UK bitumen production at highest since July 2021
London, 2 July (Argus) — UK bitumen production in April hit its highest in nearly three years even though there is only one remaining bitumen-producing refinery in the country, in Eastham. The UK government's latest provisional data showed production at 68,000t in April, up by 7pc compared with the same month last year. Bitumen production declined overall last year by 147,000t on the year to just 373,000t, the lowest since records began in 1995, after UK energy company Prax Group ceased all bitumen production at its Lindsey refinery in the northeast of England in early 2023. In January-April this year, the UK produced 77,000t of bitumen, a decrease of 10,000t from the same period last year. UK consumption in April was at 122,000t, up 7,000t since the other refineries in the UK closed by April 2023. With the UK's general election taking place on 4 July, parties have made promises which could support bitumen consumption. The UK government this year committed £8.3bn ($10.52bn) to fill potholes and resurface roads by 2034, and the UK opposition party Labour last month pledged to keep this plan in place if elected while additionally funding councils £320m over five year by deferring the planned A27 Arundel bypass works in Sussex. Asphalt Industry Alliance (AIA) in March 2024 published a report stating that the total number of potholes filled in 2022 was 1.4mn, down from 1.7mn in 2021 and the equivalent of one every 22 seconds. Spending on pothole repairs fell to £93.7mn last year from £107.4mn in 2021. By Fenella Rhodes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Prompt European gasoline forward curve in contango
Prompt European gasoline forward curve in contango
London, 2 July (Argus) — Prompt Eurobob gasoline time spreads have entered a contango structure — where prompt values are at a discount to forward prices — signalling the weakest structure for the time of year since the pandemic year of 2020. July Eurobob swaps were at a 75¢/t discount to August swaps at the close on 1 July. The spread had been in a relatively shallow backwardation — when prompt prices are at a premium to later dates — in recent sessions, although it has been narrowing steadily from $6.50/t on 1 June. It is uncommon for the forward structure to be in contango at this time of year. In the corresponding session last year the July swap was at a $19/t premium to the August swap, and since 2009 the current scenario has occurred only twice — in 2020 when much of Europe was under Covid-19 lockdown measures, and in 2016 when the front of the curve was pressured by high European inventories and high US supply. The contango structure reached $5.50/t on both occasions. The recent move builds on weakness exhibited last month , when the front of the forward curve between June and July moved into contango, a structure which was maintained through the rest of June. Demand for gasoline has failed to meet traders' expectations this European summer. Stock levels have been robust, particularly in the US where high refinery utilisation rates have boosted supply and stifled the requirement for European product. This was shown in gasoline crack spreads to North Sea Dated crude in June , which moved sharply lower — counter-seasonally — to an average of $14.87/bl, $5.83/bl lower than in May and down by $9.68/bl compared with year ago. There are already signs of this reversing however. In early trading today the front of the forward curve strengthened, with July marked at parity to August, according to brokers. Discounts in the spot barge market at the Amsterdam-Rotterdam-Antwerp (ARA) hub have narrowed relative to August Eurobob swaps today, indicating firmer demand, with participants saying there is a more workable transatlantic arbitrage. By Jonah Sweeney Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
British Columbia raises biofuels output goal
British Columbia raises biofuels output goal
New York, 28 June (Argus) — British Columbia has increased by 15pc its 2030 goal for renewable fuels production in the province, driven by the success of its low-carbon fuel standard (LCFS). The province aims to produce 1.5bn liters/yr (26,000 b/d) of renewable fuels by 2030, up from its prior goal 1.3bn l/yr, the government said Thursday in a report on its clean energy strategy. British Columbia's LCFS has driven investment in petroleum alternatives and enabled more ambitious biofuel targets, with the province on track to produce 840mn l/yr of renewable fuels by 2026, according to the report. The new goal specifically covers renewable liquid fuels like renewable diesel and sustainable aviation fuel. The province also aims to scale up renewable natural gas and hydrogen, the report said. British Columbia's LCFS targets a 30pc reduction in the carbon intensity of the diesel and gasoline fuel pools by 2030 as well as a 10pc reduction in the carbon intensity of aviation fuels. The provincial program, which operates alongside new federal requirements, has the toughest reduction targets of any North American LCFS. LCFS programs require yearly reductions in transportation fuel carbon intensity. Conventional, higher-carbon fuels that exceed annual limits incur deficits that suppliers must offset with credits generated from the distribution of approved, lower-carbon alternatives. British Columbia justified its renewable fuels goals in the report, arguing that "liquid and gas fuels will remain essential for the foreseeable future" for long-haul transportation, industry, and remote communities with less access to electricity. A more ambitious domestic production target is also designed to reduce the province's dependence on fuel imports. The only provincial fuel producers are Tidewater Midstream and Infrastructure's 12,000 b/d refinery and Tidewater Renewables' 3,000 b/d renewable diesel refinery in Prince George as well as Parkland's 55,000 b/d refinery in Burnaby that co-processes renewable feedstocks with conventional petroleum feedstocks. By Cole Martin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US Supreme Court ends 'deference' to regulators
US Supreme Court ends 'deference' to regulators
Washington, 28 June (Argus) — The US Supreme Court's conservative majority, in one of its most significant rulings in years, has thrown out a landmark, 40-year-old precedent under which courts have offered federal agencies significant leeway in deciding how to regulate the energy sector and other industries. In a 6-3 ruling that marks a major blow to President Joe Biden's administration, the court's conservatives overturned its 1984 ruling Chevron v. NRDC that for decades has served as a cornerstone for how judges should review the legality of federal regulations when a statute is not clear. But chief justice John Roberts, writing for the majority, said experience has shown the precedent is "unworkable" and became an "impediment, rather than an aid" for courts to analyze what a specific law requires. "All that remains of Chevron is a decaying husk with bold pretensions," the opinion said. For decades, under what is now known as Chevron deference, courts were first required to review if a law was clear and if not, to defer to an agency's interpretation so long as the government's reading was reasonable. But the court's majority said the landmark precedent has become a source of unpredictability, allowing any ambiguity in a law to be a "license authorizing an agency to change positions as much as it likes." Roberts wrote that the federal courts can no longer defer to an agency's interpretation "simply because" a law is ambiguous. "Chevron is overruled," Roberts writes. "Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority." The court's ruling, named Loper Bright Enterprises v. Gina Raimando, focuses on lawsuits from herring fishers who opposed a rule that could require them to pay about $710 per day for an at-sea observer to verify compliance with regional catch limits. The US Commerce Department said it believes it interpreted the law correctly, but the fishers said the "best interpretation" of the statute was that it did not apply to herring fishers. The court's three liberal justices dissented from the ruling, which they said will likely result in "large-scale disruptions" by putting federal judges in the position of having to rule on the merits of a variety of scientific and technical judgments, without the benefit of expertise that regulators have developed over the course of decades. Overturning Chevron will put courts "at the apex" of policy decisions on every conceivable topic, including climate change, health care, finance, transportation, artificial intelligence and other issues where courts lack specific expertise, judge Elena Kagan wrote. "In every sphere of current or future federal regulations, expect courts from now on to play a commanding role," Kagan wrote. The Supreme Court for years has been chipping away at the importance of Chevron deference, such as a 2022 ruling where it created the "major questions doctrine" to invalidate a greenhouse gas emission rule limits for power plants. That doctrine attempts to prohibit agencies from resolving issues that have "vast economic and political significance" without clear direction from the US Congress. That has led regulators to be hesitant in relying on Chevron to defend their regulations in court. The Supreme Court last cited the precedent in 2016. The ruling comes a day after the Supreme Court's conservatives, in another 6-3 ruling , dramatically curtailed the ability of the US Securities and Exchange Commission — and likely many other federal agencies — to use in-house tribunals to impose civil penalties. The court ruled those enforcement cases instead need to be filed as jury trials. That change is expected to curtail enforcement of securities fraud, since court cases are more resource-intensive. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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