#5 | GREETings

Tuesday gave us the much-anticipated release of GREET modeling for the IRA's 40B Sustainable Aviation Fuel tax credit. Heading into Tuesday, the market was anticipating all-encompassing guidance, outlining requirements for both sections 40B and 45Z as the current 40B blender's credit is set to morph into the 45Z Clean Fuel Production Tax Credit effective January 1, 2025. 

The Treasury Department/IRS only released 40B-SAF guidance though, which while underwhelming as it leaves lingering uncertainty heading into 2025, it likely foreshadows guidance that will eventually be released for 45Z.

 #4 | SPR vs WTI

The United States' Strategic Petroleum Reserve has been on a slow building streak since late 2023 after a record 70-consecutive-week drawdown from September 2021 through January 2023, with inventories hitting a four-decade low in July of last year.

Interesting to compare the SPR with WTI crude oil futures:

#3 | Three years = Big change

The past three years have brought incredible change in biomass-based diesel production as California's Low Carbon Fuel Standard has literally fueled a boom in renewable diesel production.

Since February 2021, renewable diesel production capacity has grown almost 350% while biodiesel capacity has declined 18% during that same time.

Collectively, biomass-based diesel production capacity has increased 78% the past three years - all on the back of rocketing renewable diesel demand.

#2 | Two products

 Soy products have been on a wild ride past few days as Argentine post strike(s) rallied the meal market, causing oil to faulter.

Additionally, bearish oil market fundamentals, Tuesday’s release of putrid March EIA feedstock data and uncertainty/fears related to Tuesday’s GREET announcement pressured oil into new lows. 

#1 | One worrisome trend

While we continue to use copious amounts of soybean oil in biomass-based diesel production - growth has stalled and showed sharp declines in February.

Soybean oil use by weight fell to a 14-month low at 888 million pounds - the first sub-900mlb month since late 2022! To add insult to injury, soybean oil’s percentage-share of all feedstocks dropped to another record low of 30.8%.

It is important to note, however, that soybean oil will continue to play a key role in biofuel production (biodiesel, renewable diesel, & sustainable aviation fuel) as it remains the feedstock in most abundant supplies. The United States (and other countries, for that matter) is on a quest for net zero that will require copious amounts of lipid feedstocks to meet declining emissions goals.

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