Brief Analysis October 7, 2024 Biofuels are making up a large share of the total distillate fuel oil consumed in the United States. Starting with the September 2024 Short-Term Energy Outlook (STEO), we began publishing forecasts for several new series that help better capture how biofuels are being consumed and overall demand for distillate fuel oil, a classification of petroleum products that includes diesel, fuel. oil, and heating oil. We made these changes to clarify how much biofuel is included in petroleum products, specifically distillate fuel. These updates are largely based on the data series we were already reporting in our Petroleum Supply Monthly (PSM) and forecast in STEO. New data are available in STEO Table 4d. What’s new in September STEO? Most notable in the new series is total distillate fuel oil consumption. The calculation of total distillate fuel oil consumption includes distillate fuel oil product (published in PSM and STEO) and two new data series: Biodiesel product supplied Renewable diesel product How did we previously calculate diesel consumption in STEO? Previously, we published only the distillate fuel oil product supplied (the proxy we use for consumption) in STEO Table 4a. These data report biodiesel and renewable diesel as refiner and blender net inputs to EIA. Net inputs are the volumes of these fuels that refiners and blenders report as being blended with petroleum distillate. We include these volumes in our distillate fuel oil product supply data because they are combined with petroleum distillate fuel supply. However, distillate fuel oil product supplied does not include biofuel consumption, which we report as standalone biodiesel product and renewable diesel product supplied, although many of these volumes are likely below the data captured in our surveys with petroleum-based distillate fuel. . Because the distillate fuel oil product does not include significant volumes of biodiesel and renewable diesel, it does not capture the total volumes of fuel consumed as distillate fuel oil. What are biomass based diesel fuels? Renewable diesel and biodiesel are two biomass-based diesel fuels that can be used instead of petroleum-based distillates. Renewable diesel is a transportation and heating fuel that is chemically equivalent to petroleum-based distillate fuel but is produced using fats, oils, or greases instead of petroleum. Renewable diesel can be used in diesel engines at any concentration. Biodiesel is made with the same feedstocks as renewable diesel, but it is usually blended with petroleum distillate at a concentration of 20% or less for automotive use due to some chemical differences from petroleum distillate. Regardless of whether renewable diesel or biodiesel is blended with petroleum distillate or consumed directly, they generally serve the same end uses and can displace petroleum-based distillate volumes. Why are we announcing a new Total Distillate Fuel Oil Series? We chose to publish the total distillate fuel oil consumption series because biofuels are making up a significant and increasing share of the distillate supplied to the market. Much of this growth is occurring on the West Coast because of state-level policies in that region, particularly California’s low-carbon fuel standard, which adds incentives from federal clean-fuel programs such as the renewable fuel standard and the biodiesel tax credit. We estimate the average share of biofuels in total distillate fuel oil consumption from 2016 to 2020 to be around 4%. Recent renewable diesel production has increased the biofuel share of total distillate fuel oil consumption from 5% in 2021 to 7% in 2023. Renewable diesel output has more than tripled from about 70,000 barrels per day (b/d) in 2021 to 240,000 b/d this year, as private investment inflows have helped boost production capacity. We expect the biofuel share of total distillate fuel oil consumption to increase to 9% in 2024. The increasing share of biofuels in distillates supplied to end users is a good measure of distillate consumption in the market. Data provided by distillate product over the past five years (capturing petroleum-based distillate fuel and incorporating only a fraction of biofuels as net inputs) indicate that distillate consumption has not recovered to 2019 levels. However, the total distillate fuel oil consumption series, which considers biofuels more fully, shows that distillate consumption in 2022 will surpass 2019 levels. Several macroeconomic indicators of increasing distillate consumption (measured including US real GDP, US real goods imports, and manufacturing activity, the Federal Reserve’s Industrial Production Index) all surpass 2019 levels by 2022, making distillate use a more relevant measure of total distillate fuel oil use. Provides support. In the first half of 2024, the supply of distilled fuel oil product indicates that consumption has declined by 5% compared to the average of the last five years (2019-23). Total distillate consumption over the same period effectively shows consumption similar to the five-year average. The difference between the two reflects the share of distillate biofuels consumed in the market. We revised our forecasting method for distillate consumption to better account for biofuels in the distillate supplied to market. We now forecast total distillate fuel oil consumption using macroeconomic indicators to determine overall consumption by end users. We forecast distillate fuel oil product supplied by subtracting our forecast for renewable diesel product and biodiesel product supplied from our total distillate fuel oil consumption forecast. Key Contributors: Jimmy Troderman, Alex D. Keyserling
EIA now publishes additional US biofuel and distillate forecasts
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