May 13, 2024 [Reuters]- U.S. refiner Vertex Energy said on Thursday it will pause renewable diesel production at its refinery in Mobile, Alabama, and convert it to produce fossil fuels instead, citing macroeconomic woes which might persist through next year.

Renewable diesel can fully substitute traditional diesel, but it is much more expensive to make and therefore relies on government blending mandates and subsidies.

Experts say these mandates have failed to keep up with supply growth, cratering margins for those who bet on biofuels as a means to survive the transition away from fossil fuels.

Vertex, which only last year converted some units of its 75,000 barrel per day refining complex to produce renewable diesel, said it will exhaust its feedstock inventory before pausing renewable diesel output. It will then convert the units back to fossil fuels output.

The conversion process will likely happen by the end of this year, according to Tudor Pickering & Holt.

“Due to the significant macroeconomic headwinds over the past 12 months, many of which they believe will continue to occur over the next 18 months and potentially beyond, they have decided to strategically pause their renewable diesel business and pivot to producing conventional fuels,” Vertex CEO Benjamin Cowart said in a first quarter earnings statement.

The company can still convert these facilities to produce renewable diesel again “based on market conditions,” it said.

Vertex said the unit ran at just around 50% of its 8,000 bpd capacity in the first quarter and renewable fuel gross margins fell from $12.11 a barrel in the fourth quarter of 2023 to $10.29 a barrel in the first quarter this year.

Free Trial: Access 13,300 Tank Terminal and Production Facilities

13,300 tank storage and production facilities as per the date of this article. Click on the button and register to get instant access to actionable tank storage industry data