U.S. Biodiesel Industry Update (01/17/2016

U.S. Biodiesel Industry Update (01/17/2016

Biodiesel production in the United States in 2015 reached a volume of 1.263 billion gallons, declining 1.2% from the 2014 level (1.278 billion gallons) (see Figure 1). Production from January to September 2016 was up 19.7% to 1.128 billion gallons compared with the same period the previous year (0.943 billion gallons). Production estimates for the entire 2016 year by the U.S. Energy Information Administration, published in the January 2017 edition of the Short Term Energy Outlook report, indicated biodiesel production in 2016 averaged 1.518 billion gallons/year (99,000 barrels/day), increasing 20.1% compared with 2015.  The report also indicated 2017 U.S. biodiesel production is expected to increase 5.1% to 1.594 billion gallons/year (104,000 barrels/day) relative to 2016. EIA projects 2018 biodiesel production at 1.701 billion gallons (111,000 barrels/day) up 12.1% from the 2016 estimate.   

The $1/gallon biodiesel tax credit implemented in 2005 has played a role in the development of the biodiesel industry. The tax credit has had extensions and also has been allowed to expire temporarily, creating uncertainty in the industry. In December 2015, Congress retroactively extended the tax credit for two years, from January 1, 2015 through December 31, 2016.

U.S. biodiesel imports have been encouraged as the tax credit goes to the blender of the biodiesel with a traditional fuel, and not to the producer of the biodiesel. In 2015, U.S. biodiesel imports rose 83.5% to 0.353 billion gallons from 0.192 billion gallons in 2014. Although U.S. biodiesel exports increased 5.9% in 2015 relative to the previous year, the U.S. continued as a net biodiesel importer, with a net import volume of 0.265 billion gallons in 2015. Biodiesel imports during the first nine months of 2016 increased 70.6% to 0.412 billion gallons, compared with 0.242 billion gallons in the same time period in 2015. The January-September 2016 totals surpassed the 2015 import total of 0.353 billion gallons.

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