California LCFS data shows biodiesel and renewable diesel volumes hit quarterly highs during the fourth quarter of 2018

California Air Resources Board (CARB) projected quarterly biodiesel and renewable diesel production to be 162.5 million gallons, or 650 million gallons for the year.  Biodiesel was expected to contribute 50 million gallons per quarter and renewable diesel 112.5 million.  Fourth quarter data released last night showed biodiesel exceeded fourth quarter expectations with 57.3 million gallons while renewable diesel was slightly under forecast at 109.4 million gallons.

Fourth quarter production accelerated for both biodiesel and renewable diesel.  Biodiesel production was up 15 percent from the third quarter and 30 percent over fourth quarter 2017. Renewable diesel shrugged off a poor third quarter showing with production rising 37 percent and soaring 42 percent over the fourth quarter 2017.

Biodiesel and renewable diesel hit all-time highs during the fourth quarter, taking a sizable chunk out of diesel demand in the process.  Diesel production was 9 percent below third quarter output and 12 percent lower than the fourth quarter of 2017. Diesel production of 3.2 billion gallons for the year was down 131.5 million gallons from 2017 but still slightly over the 3.11 billion CARB had forecast. Renewable diesel and biodiesel accounted for 16.6 percent of all the diesel and diesel substitute fuels produced during the fourth quarter. Renewable diesel represented 10.9 percent of the overall diesel/diesel substitute fuel pool while biodiesel accounted for 5.7 percent.

A solid fourth quarter performance was not enough to rescue a year that had seen both biodiesel and renewable diesel volumes struggling.  Biodiesel production failed to meet forecast in each of the first three quarters and renewable diesel was unable to meet projections in any quarter. Full year biodiesel expectations were for 200 million gallons.  A strong fourth quarter made up for lost ground, as total yearly production missed forecast by only 15.5 million gallons, or 7.8 percent.

Renewable diesel production hit its peak of 109.4 million gallons in the fourth quarter but never hit its projected quarterly average of 112.5 million.  Renewable diesel output missed forecast by 66.4 million gallons or 14.8 percent.  Volume analysis tells part of the story, tomorrow we will look at how credit production performed.

Biodiesel Market

Closing Comments

Takeaways from the latest CARB LCFS release:

• Ethanol credits increased one percent, they were forecast to fall
• On road electricity credits surpassed forecast, up 73 percent year over year
• Biodiesel credits increased 13 percent in Q4 and 39% over 2017 Q4
• Renewable diesel credits increased 57 percent in the fourth quarter and 59 percent over a year ago
• Ethanol volume was 10 percent of all gasoline and gasoline substitute fuels
• Biodiesel volume was 6 percent of all diesel and diesel substitute fuels
• Renewable diesel volume was 11 percent of all diesel and diesel substitute fuels
• The credit bank increased for the first time since the third quarter of 2017
• There was no step down in base year carbon intensity for diesel and diesel substitute fuels in 2018, making credit generation easier than it would have been
• Expect credit generation to be more difficult for diesel substitute fuels and deficit generation higher for diesel in 2019

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I always look forward to hearing from our customers.  Please feel free to contact me with any questions, comments, or suggestions you may have.  If you buy, sell, or trade any of our products, I would like to hear from you.  Bob Lane at [email protected]  847-549-3640.