US renewable diesel and biodiesel production plunges in Q1
TL/DR –
US biodiesel and renewable diesel production fell significantly in Q1 2025 due to uncertainty around federal biofuel tax credits and negative profit margins, according to the US Energy Information Administration (EIA). Biodiesel production dropped to 60,000 barrels per day (bpd) in January 2025, the lowest level since January 2015, and about 40% less than the previous year, while renewable diesel production averaged 170,000bpd in Q1, down 12% compared to the same quarter in 2024. However, the EIA forecasts that production of both types of biofuel will increase throughout the year, but it expects annual biodiesel production in 2025 to be 15% lower than 2024 due to continued low production and the potential closure of less profitable plants.
US Renewable Diesel and Biodiesel Production Drops in Q1 2025
First quarter of 2025 witnessed a significant drop in US renewable diesel and biodiesel production. The US Energy Information Administration (EIA) attributes this downturn to uncertainties surrounding federal biofuel tax credits and unprofitable margins.
Although biodiesel and renewable diesel production is expected to increase throughout the year, biodiesel production may still remain below the previous year’s levels. In January 2025, biodiesel production declined to 60,000 barrels per day (bpd), the lowest since January 2015, down 40% compared to last January.
February and March saw a partial increase in biodiesel production, resulting in a quarterly production of about 70,000bpd, a decrease of over 30% compared to Q1 of 2024. Concurrently, renewable diesel production averaged about 170,000bpd, down 12% from Q1 2024.
Renewable diesel production decline wasn’t as sharp as biodiesel due to a rapid increase in renewable diesel production in 2024. Reduced output was partially counterbalanced with a 20% increase in renewable diesel production capacity in Q1 2024.
Q1’s poor profitability resulted in production drops with Diamond Green, Phillips 66, and Marathon reporting operating losses from renewable diesel. Additionally, trade press reported negative margins for biodiesel.
Federal biofuel tax credit uncertainties further complicated biomass-based diesel production in Q1 2025. Prior to 2025, producers and importers of biomass-based diesel received a blender’s tax credit (BTC) for each gallon blended with petroleum diesel.
Under the Inflation Reduction Act (IRA), BTC was to be replaced with Section 45Z Clean Fuel Production Credit in 2025, altering the flat US$1/gallon tax credit to a value based on carbon intensity of feedstocks used. However, delays in finalizing tax credit guidance left producers unsure about profitability, leading some to idle operations.
EIA forecasts a rebound in biodiesel and renewable diesel production as the year progresses to meet existing Renewable Fuel Standard (RFS) mandates. According to EIA’s May Short-Term Energy Outlook, 2025’s renewable diesel production might increase by 5% due to increased capacity, while biodiesel production could reduce by 15% due to early year low production and potential closure of less profitable plants.
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