In July, U.S. renewable diesel production capacity experienced its largest monthly decline on record, according to data from the Energy Information Administration (EIA). The capacity to produce biomass-based renewable diesel fell by approximately 299 million gallons per year, dropping to around 4.60 billion gallons annually. This marks only the second decline since the EIA began tracking these figures in 2021.
The decline comes amidst a backdrop of rapid industry expansion driven by government mandates and subsidies that have encouraged investments. However, new plants are now producing more renewable diesel than the market can absorb, leading to an oversupply situation.
Vertex Energy, a recent entrant in the renewable diesel sector, filed for Chapter 11 bankruptcy protection last week after halting production due to macroeconomic challenges. The demand for vegetable oils used as feedstock for renewable diesel fell by over 5.6% from June to July, totaling 1.168 billion pounds. In contrast, demand for feedstocks for biodiesel production rose by 5.6% to 866 million pounds.
The consumption levels suggest that biofuel producers are operating below their capacity, with renewable diesel plants theoretically able to process at least 3.162 billion pounds of feedstocks monthly if running at full capacity.