Surging feedstock prices have pulled US renewable diesel producer margins down from recent highs. Even so, plants remain far more profitable than they were before March.
According to a Prima CarbonZero analyst report, Gulf Coast producers utilizing domestic used cooking oil are seeing average margins at more than $1 per gallon above the 2025 average. Soybean oil margins into renewable diesel have risen slightly, but they remain within 40 cents per gallon of the average grease-based plant.
That narrow gap reflects soybean oil’s discount to used cooking oil, balanced against weaker payouts from state Low Carbon Fuel Standard programs.
Heating oil has moved more slowly by comparison. With no clear sign that full oil supply through the Strait of Hormuz will return soon, heating oil has been climbing back from its early-April lows following the Iran war ceasefire toward the $4-per-gallon mark.
Two months of war-related disruptions to mineral oil supply now look likely to give way to a longer period of undersupply. The pressure is most acute in international jet fuel markets, though diesel markets are tightening as well. Stock draws have helped contain prices, but only for so long.
For US producers, rising overseas fuel prices are reshaping the balance between domestic and export markets.
International feedstocks still offer a profitable pathway into the domestic RFS 2 market, supported by large discounts on overseas greases relative to Gulf Coast grease prices. But the economics look even stronger when those feedstocks are brought into the US, converted into renewable diesel or sustainable aviation fuel, and then exported.
That arbitrage could divert some US capacity away from supplying the domestic D4 RIN market. That matters because D4 RIN generation finished March well short of annual RFS 2 requirements. The market needs producers to move closer to full capacity this year to help balance RIN supply. Instead, rising global fuel prices may indirectly tighten the US biomass-based diesel market.
Europe is adding to that pull. European HVO prices have rebounded more sharply than comparable US prices as buyers respond to the loss of Mideast Gulf crude and refined product supply. In a market already worried about physical distillate shortages, European buyers can secure biofuel barrels at deeply discounted rates for the environmental attributes they offer.
Northwest European SAF prices have also surged, reaching $3,000 per metric ton, or about $9 per gallon. That move has narrowed the gap with European HVO and highlights the relative affordability of blending mandated SAF compared with today’s elevated fossil jet fuel prices.
The result is a stronger case for US SAF exports, but potentially at the expense of domestic RIN production.
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