Commodities
Biofuel Producers Benefit as Renewable Fuel Credits Approach Record Levels, EIA Says
Higher US biofuel blending targets have pushed renewable fuel credit prices close to record highs and improved returns for ethanol, biodiesel and renewable diesel producers, the US Energy Information Administration said Wednesday.Higher US biofuel blending mandates have doubled renewable fuel credit prices this year, while stronger gasoline and diesel markets improved biofuel economics, the EIA said.The federal renewable fuels program allows companies to earn tradable credits when they bring biofuels into the US fuel market, either through domestic production or imports, the EIA said.Fuel suppliers that fall short of government biofuel requirements can purchase those credits to satisfy compliance obligations, while others meet the targets by blending renewable fuels directly into gasoline and diesel.As of June 4, biomass-based diesel D4 credits traded at $2.41 and ethanol D6 credits traded at $2.37, both approaching the record levels reached in 2021, according to the agency.At current prices, biodiesel and renewable diesel producers can generate more than $3.50 per gallon from renewable fuel credits. Biodiesel creates 1.5 credits per gallon, while renewable diesel generates between 1.6 and 1.7 credits.The Environmental Protection Agency helped drive the increase after finalizing a rule on March 27 that raised renewable fuel blending requirements for both 2026 and 2027 above 2025 levels, the agency said.Higher gasoline and diesel prices have also improved biofuel economics. Since mid-March, ethanol on the US Gulf Coast has generally remained cheaper than gasoline on an energy-equivalent basis, encouraging additional blending.After including the value of renewable fuel credits, ethanol traded at a discount of more than $2 per gallon to gasoline during May and June, making it increasingly attractive for fuel suppliers, according to the agency.Higher renewable identification number, or RIN, prices have improved production and blending margins for biodiesel and renewable diesel producers in 2026, the EIA added.The agency said the Bean Oil-Heating Oil, or BOHO, spread remains a key measure of biodiesel and renewable diesel economics because it tracks the relationship between soybean oil feedstock costs and heating oil prices.RIN values have risen faster than the BOHO spread this year, indicating that higher renewable volume obligations are providing an additional boost to margins and supporting significantly stronger biodiesel and renewable diesel economics than in 2025, according to the agency.The Energy Information Administration expects record fuel ethanol and renewable diesel production in 2026 as higher blending mandates, stronger fuel prices and expanding biofuel capacity support output growth. Biodiesel production is also forecast to increase but remain below previous record highs.Fuel ethanol production is projected to rise 2% in 2026, with its share of gasoline consumption increasing to 10.7% from 10.5% in 2025, according to the EIA.Renewable diesel output is expected to increase 24% and biodiesel production 41% from 2025 levels, while all three fuels are forecast to post further gains in 2027 as renewable volume obligations rise again.