Save for later Print Download Share LinkedIn Twitter Independent refiner PBF Energy said that oil demand in the US has essentially recovered from the Covid-19 pandemic, but mandates on blending biofuels into refined products pose a serious headwind. The company also said it would make a decision on entering the market for renewable diesel in the coming months. Blending Blues Speaking to investors and analysts during a call to discuss its first-quarter earnings, PBF President Matt Lucey described the renewable fuel standard (RFS) -- a law that requires the blending of specific volumes of biofuels into the transportation fuel pool each year -- as both broken and unfair (OD Apr.27'21). “Runaway compliance costs under the RFS are creating another unsustainable burden on merchant refiners,” he said. “Unless the [Joe Biden] administration and Congress address the program, the unfortunate trend of [refinery] closures and loss of jobs in the US are likely to accelerate.” PBF is aggressively lobbying to change the RFS, according to CEO Tom Nimbley, who noted one potential solution is to replace the RFS and its blending mandates with an outright low-carbon fuel standard (LCFS). “There's no prioritization given to large retailers, large refiners, integrated refiners versus merchants” under such a regulation, Nimbley said. When refiners cannot blend physical biofuel into diesel or gasoline, they can purchase an offsetting credit known as a renewable identification number (RIN). But refiners have long said RINs are too expensive and volatile. Lucey said the RIN basket now “equates to 18¢ per gallon costs on transportation fuels. ... This cost is being borne by the consumer and the merchant refiner, and ... accrues to the benefit of large integrated oil companies and large retailers.” Renewable Diesel PBF Energy is searching for a partner to invest in renewable diesel capacity at its Chalmette, Louisiana plant, furthering a proposal from last year. “We are in active discussion with potential investment partners,” Lucey said. The project would involve repurposing an idled hydrocracker and other units to produce up to 20,000 barrels per day of renewable diesel. PBF personnel said they are open to a partnership with a feedstock provider or with a company to the downstream. After a final investment decision, the project could be completed within a year and at a substantially lower cost than a greenfield project or conversions being pursued by other companies. Should it green light the project, PBF would be walking a similar path to Valero Energy, Phillips 66, Holly Frontier, Marathon Petroleum and Calumet (OD Feb.2'21). California Driving While demand for gasoline, diesel and even jet fuel is recovering around the US, the trend is particularly strong in California, PBF executives said. The state is the site of some 11% of typical US gasoline demand, and PBF estimates that California’s consumption of that fuel is roughly 97% of pre-pandemic levels, compared to some 95% nationwide. Regional diesel demand has now breached pre-pandemic levels, Nimbley said, partially as a result of two months of frenetic activity at the ports of Long Beach and Los Angeles. But jet fuel consumption -- both on the West Coast and the US more broadly -- has limited upside in the immediate future as domestic flights have already almost reached pre-pandemic levels. “It's the international travel that is recovering more slowly; we're actually seeing domestic travel start to come up pretty nicely,” Nimbley said. PBF Energy reported a net loss attributable to shareholders of some $41.3 million for the first quarter of 2021, compared to a net loss of over $1 billion in the same period last year. Frans Koster, New York PBF Energy Q1'21 Earnings Results ($ million) Q1'21 Q1'20 %Chg. Revenues $4,925 $5,278 -7% Operating Costs 4,867 6,644 -27 Net Income -41 -1,066 96 Adjusted Income -$42 -$1,077 96 Throughput ('000 boe/d) 751 863 -13% Figures rounded to nearest million.