Key facts
- Renewable diesel producers are shifting sales to Texas.
- Demand for renewable diesel is easing in California.
- US renewable diesel output has reached record levels.
- Texas offers an excise tax abatement program for renewable diesel.
- The tax abatement makes renewable diesel competitive with conventional ULSD.
- Producers are moving product from the US Gulf Coast to Texas.
Renewable diesel producers are increasingly directing their product flows to Texas, a notable shift away from California, which has seen its demand for the biofuel decrease. This redirection is occurring against a backdrop of record-high renewable diesel output across the United States, particularly along the US Gulf Coast. The primary driver for this change in market focus is Texas's excise tax abatement program. This program effectively lowers the cost of renewable diesel, making it more economically competitive when compared to conventional ultra-low sulfur diesel (ULSD). The combination of softening demand in California and the favorable tax environment in Texas is prompting producers to re-evaluate their distribution strategies. This move is expected to influence regional fuel markets and potentially impact pricing dynamics for both renewable and conventional diesel.