By Michael Devine, AMERIgreen Energy
EDITOR’S NOTE: The views and opinions expressed in this article are those of the author and do not necessarily reflect the policy or position of New England Fuel Institute.
I believe that it’s fair to speculate that most historians will remember the year 2016 as the year that the American people elected Donald J. Trump as the 45th President of United States. The year 2016 was also, on a much smaller scale, one of the best years ever for heating oil marketers to blend biodiesel.
Biodiesel blend margins were nominal to start the year in 2016, but as we moved into the summer months we saw the blend economics explode. Heating oil marketers who marketed B20 blends (20 percent biodiesel) were able to lock in forward differentials and fixed pricing programs for the majority of their upcoming heating season, and effectively “made their margin” for the heating season before recording a single degree-day.
Trump and the RFS
As winter winds down, the biodiesel markets are admittedly somewhat paralyzed. There are huge unknowns clouding the outlook. The Trump administration appears less friendly toward the renewable fuels industry than prior administrations have been, but it is still early. Many producers are taking a wait-and-see approach toward 2017 production. While Trump expressed strong support for the RFS as a candidate, his selection of Scott Pruitt to lead the Environmental Protection Agency (EPA) raised eyebrows. Pruitt was the Attorney General of Oklahoma, a big oil state, and he has a history of suing the EPA.
There was a recent positive sign for the RFS markets, however, when Pruitt voiced support for both the Renewable Fuel Standard and the “rule of law” in January meetings with a group of Midwest Republican senators. Iowa’s senior U.S. Senator, Chuck Grassley, said in a statement, “We got a very positive response on Mr. Pruitt’s support not just for the RFS, but more importantly, for the rule of law. The rule of law is that what Congress passed, the EPA is supposed to follow and not undermine it, the way that previous administrations have done with the RFS.”
Trump and The Biodiesel Tax Credit
The other federal policy concern for the biodiesel market moving into 2017 is the biodiesel industry’s lack of optimism regarding a biodiesel tax credit (BTC) extension, as the BTC lapses again—for the fifth time. With the Republican Party holding a majority in both houses of Congress, we are likely to see what might be described as the single largest tax-reform bill since 1986. The fear is that the U.S. Congress and the Trump White House might eliminate many of the existing energy tax credits. What used to be referred to as a collection of tax extenders is now likely going to have each individual energy tax credit being considered on its own individual merits.
With differing biodiesel interests lobbying against one another as to whether the biodiesel tax credit should remain as a blender’s tax credit as opposed to moving to a producer’s tax credit, biodiesel’s detractors will be in a very good position to make the case that since biodiesel is already receiving RFS support, why does the industry still need a tax credit at all? The possible lapse of the biodiesel tax credit, as well as Trump’s decisions on cabinet appointments, have created a lot of anxiety in the biodiesel markets, causing a number of producers to ramp production lower so far in 2017.
Remember: Trump is the Ultimate Entrepreneur
Speaking on potential policy reversals and changes rumored under President-elect Donald Trump, Myers Jaffe, Executive Director of Energy and Sustainability at the University of California, Davis, warned of the dangers of moving against innovation. “If we change course and stop focusing on advancing technology, we are going to get behind and wind up non-competitive,” said Jaffe. She discussed consumer trends exhibited from “environmentally oriented” millennials and how corporations are answering those calls. She went on to say that 43 percent of Fortune 500 companies have targets in one of three categories: greenhouse gas reduction commitments, energy efficiency and renewable energy.
For those of us who have come to realize the highest value of the biodiesel gallon over the years, we have found that the profits are not only generated around a blend margin; growing gallons is contingent in the consistency of always reinforcing Bioheat® Fuel’s benefits to the consumer.
Bioheat marketing is all about an entrepreneur attitude, packaged through an altruistic message to the Oilheat consumer. While “the experts” may not always call national elections or commodity markets perfectly, one thing is for sure: Bioheat marketing will continue to make America great, again and again and again.