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Ructions in the global oil market have spread to restaurant kitchens across the US as chefs who once had buyers vying for their used cooking oil find they must now pay to have it taken away.
The rise of US biodiesel, refined from fats and vegetable oils, turned a waste product into a sought-after commodity when crude prices were high, even attracting the attention of thieves armed with bolt cutters and vacuum hoses.
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But the collapse in crude oil prices has blunted biodiesel’s edge against conventional diesel. Production capacity at the refineries which turn fat into fuel is also far larger than demand, causing the US biodiesel industry to lose about $130m last year, a University of Illinois economist has estimated.
In 2013, benchmark yellow grease sold for 36 cents per pound, according to price reporting service The Jacobsen. As biorefineries’ financial woes have crept upstream, wholesale grease now sells for less than 20 cents, Jacobsen data show.
“It used to be we paid customers for their oil. Now, people are charging to pick up the oil,” said Natalie Chakov, office manager of the Green Oil Recycling group in New York, which has stopped collecting cooking oil to focus on cleaning grease traps.
Last week, a court-ordered liquidation began for Grease Lightning, a collector founded in 2010 whose smudged tank trucks were once a common sight outside pubs and restaurants around New York City. NYC Hospitality Alliance, a restaurant industry group, confirmed most haulers would no longer pay for used oil.
Some large fast-food chains are faring better, however. Yum Brands, which operates KFC, Pizza Hut and Taco Bell, told the FT: “We partner with contractors who pick up our used cooking oil and reuse it for biodiesel and animal feed. We do not pay them to do this, they pay us.”
At the peak, refineries were paying collectors $3 a gallon for rendered cooking oil, said Ryan Faulkner, general manager of the Virginia Biodiesel Refinery company, which also has a grease collection business in the southern state. As those prices have declined, “you can’t afford to pay a restaurant anything”, he said.石油圈原创www.oilsns.com
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US biodiesel producers made 1.42bn gallons last year, down slightly from the previous two years, according to the National Biodiesel Board. Recycled cooking oil supplied 17 per cent of the raw material, second only to raw soyabean oil.
The output was well short of refineries’ capacity of more than 2bn gallons a year, and came amid uncertainty about the future of a $1-per-gallon tax credit for biodiesel blenders. Imports also jumped by a quarter last year. “You have an industry that is substantially overbuilt,” said Scott Irwin, an economist at the University of Illinois.
Federal law requires fuel companies to mix a minimum amount of biodiesel with their regular diesel. Without the mandate, biodiesel would struggle for market share against petroleum-based diesel whose prices have dropped 44 per cent in the past year.
Wholesale biodiesel on the Gulf of Mexico coast cost $2.82 a gallon last week, while conventional diesel fuel was $1.03, according to Oil Price Information Service.
The market may yet rebound. The federal government recently decided to require at least 1.9bn gallons of biodiesel use this year, almost double the amount outlined in a 2007 law. Congress also recently reauthorised the tax credit for 2016 and retroactively reinstated it for 2015.
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