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Renewable diesel “eats out” petroleum refining; dropped to lowest since 2016

renewable diesel eats out petroleum refining

Renewable diesel is “eating out” the U.S. petroleum refining capacity, as many refiners are closing down their facilities to convert them to renewable diesel production units. As the cleaner fuel gains competitiveness, petroleum refining capacity in the U.S. has dropped to a 4-year low record, the Energy Information Administration (EIA) informed.

Between February and April this year, petroleum refining capacity hit a record high of 19,0 million of barrels per calendar day (b/cd); but, since then, many refineries have closed and with them the U.S. refining capacity has dropped to a low record of 18,4 million b/cd, not seen since 2016.

This behavior is directly related to lower petroleum subproducts demand, and the competitiveness that cleaner alternatives, like renewable diesel, have gained in front of fossil fuels. Indeed, many of the refineries closed are being converted into renewable diesel production units, according to EIA.

“Operable refinery capacity is the amount of capacity that is in operation or could be brought into production within 90 days,” EIA’s report explains; and underlines that, after February’s peak, operable refining capacity dropped by 335,000 barrels per calendar day, around May.

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Refiners consider turning them petroleum refineries to renewable diesel plants

Then, in June, it fell another 19,000 barrels. Both events were directly related with the closure of Philadelphia Energy Solutions refinery in Pennsylvania, and with the closure of Marathon’s refinery in Dickinson, North Dakota, respectively. The latter of which was closed to be turned to a renewable diesel plant.

Further closures have been happening, like Shell’s Convent refinery in Louisiana, after several selling intents. The estimated capacity of Convent was around 211,146 million barrels. In mid-October, PBF Energy announced the closure of almost all of its refining units in Paulsboro, New Jersey.

By the end of August, HollyFrontier shut all units at its Cheyenne, Wyoming, refinery. Nearly 48,000 barrels c/d were lost. Nevertheless, company’s intent is to reopen the facility in 2022, as a renewable diesel plant.

Same happened with Marathon, when in August closed its 27,000 barrels c/d in Gallup New Mexico, and its 161,000 b c/d in Martinez, California, due to reduced petroleum demand. According to EIA, Marathon is considering reopening Martinez’s unit as a renewable diesel facility.

According to S&P Platts estimates, nearly 1,2 million barrels a day of refining capacity were lost since the pandemic hit the globe in early 2020.

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