Renewed Food vs. Fuel Competition Stokes Inflation in Both

History of Biodiesel and the First Food vs. Fuel Competition

First generation biofuels were those made from food crops – principally corn and soy beans; such as, much of the ethanol produced in this United States that is required to be blended with petroleum based gasoline.  Even the Sierra Club recognized that corn based ethanol had harmful land use and environmental effects.

Research continued on what were called second generation biofuels (crop waste, tree waste, municipal waste, non food crops, and more) and third generation (algae).  These have mostly turned into dead ends.  When Abengoa shut down its crop waste to biofuel plant in Kansas in 2015, a local official was quoted as saying that there wasn’t much crop waste anyway – it all gets used in other ways.  Another shortcoming with the concept is that crop waste had to be trucked to the plant from 150 miles all around, making the environmental benefits dubious from all the diesel fuel burnt on these trips.

Algae has fared no better.  We hear occasionally of an improved strain of algae with greater energy potential, but when you create an algae pond in the real world, you find that things eat the algae.  And if you do the math, the entire world would have to be covered in algae ponds due to the low yields from the process.  Popular Science recounts the challenges and current state of algae research.

The New Food vs. Fuel Competition in 2022 and Beyond

Which leaves us stuck with the situation that most biofuels in the US are still being made from food crops.  It seems that the Department of Energy has given up on the idea of solving the food versus fuel competition as it has been promoting the conversion of petroleum oil refineries into “renewable” diesel refineries, where the fuel is made from the same old culprits: corn oil and soy bean oil.  One promoter of the idea remarked that 56% of the US soy bean crop is exported, which might all be made into fuel instead.  But surely that exported soy is being used to feed people or animals.  How is that not a worthy use for a food crop?

United States is Losing Crude Oil Refining Capacity

A big reason for the surge in gasoline and diesel prices in 2022 is the gathering loss of petroleum refining capacity in the US.  The US has lost nearly 5% of its petroleum refining capacity in two years from early 2020 through early 2022.  The impetus was twofold:

• Fuel demand dropped dramatically during the lockdowns in the wake of the COVID-19 pandemic.  Refineries began losing money.  Oil executives began to believe that peak fuel demand had been seen.
  
• The US government’s antagonism toward the petroleum industry convinced oil executives that life would be easier by aligning their strategy with government priorities.  Accordingly, we’ve seen a growing number of conversions of plants from petroleum refining to renewable diesel.

We also saw the largest refinery on the East Coast spectacularly blow up, burn, and close permanently in 2021.

Quick Recovery in Fuel Demand in 2021 and 2022

The economic snapback from the pandemic has been sharp with unprecedented fuel demand without the usual seasonal variation.  The explosion in ecommerce has taxed the transportation and fuel industries to the breaking point.  The remaining crude oil refineries are enjoying record profits.  Regardless, new petroleum to renewable conversions continue to be announced.

Explosions and Conversions of Petroleum Oil Refineries

Let’s review some of the refinery closures and conversions that have taken place in the last couple years.

Philadelphia Energy Solutions Refinery in Philadelphia, PA

Crude oil had been refined on this site alongside the Schuylkill River since 1870.  The company had gone bankrupt in 2018, and then come out of it and reorganized.  It was the largest oil refinery on the East Coast at 335,000 barrels per day capacity on 1,400 acres, employing 1,000 unionized workers.

Then some bad luck struck – a mislabeled pipe, the company said.  On June 21, 2019, a leak of hydrofluoric acid caused a series of explosions, fires that raged all day, and multi thousand pound pieces of metal tanks being flung into the river.  Thankfully, only five workers were injured.

The company expected an insurance payout and planned to rebuild, but within a month it declared bankruptcy yet again.  Two plans competed in the bankruptcy court: a union-backed reorganization and rebuild as a refinery versus a permanent closure and redevelopment of the site.  The old refinery had been the biggest contributor of pollution in the Philadelphia metro, and city government and environmental activists favored redevelopment.  The court chose the redevelopment plan as the least risky.

This was probably a sensible decision from a local perspective, but nationally it was a big contributor to the tightening supplies of fuel and the anticipated diesel shortage on the East Coast in the summer of 2022.

After the Philadelphia debacle, we are seeing a whole bunch of conversions of refineries from petroleum to renewable diesel based on corn and soy.

Phillips 66 Rodeo Renewed Refinery in San Francisco, CA

A conversion was recently announced by Phillips 66 in San Francisco.  Its Rodeo Refinery will be dubbed Rodeo Renewed.  The plant has been in operation for 125 years and was one of five petroleum refineries in the Bay Area.  The crude oil refining capacity was 120,000 barrels per day.  The renovated plant – at a cost of $850 million over 2 years – is projected to produce 50,000 barrels of renewable fuel per day.  The feedstock is the usual suspects: used cooking oil, animal fats, and seed oils.  50K bbd is an ambitious target for a renewable refinery.  The supply of UCO and animal fats are limited.  The difference will have to be made up from food crops at market price.  This is typically what we will see in these refinery conversions: a greatly reduced refining capacity, which exacerbates the trend of declining fuel production capacity in the US overall.

Marathon Dakota Prairie Refinery in Dickinson, North Dakota

 This was a small refinery, but notable for being the first new crude oil refinery to open in the US in 2015 since 1985.  After a couple ownership changes, Marathon Oil decided to convert the facility to renewable diesel with the intention of selling the fuel in California.  Marathon had experienced a period of losses during the pandemic.  The technology for the new plant comes from a Danish firm, Haldor Topsoe, which can convert vegetable oils, animal fats, and used cooking oil into gasoline, diesel, or jet fuel.   Dakota Prairie was rated at a 19K barrel per day capacity in its petroleum days, and this will be reduced to 12K b/d of renewable product.  Used cooking oil and animal fats can’t be stored for long periods that might result from transportation delays, so the bulk of production will presumably come from food crops.

Marathon Refinery in Martinez, California

This was another Marathon facility acquired from Tesoro.  Production will drop from 161K b/d of petroleum product to 730 million gallons per year of renewable product (42 gallons in a barrel, so 730,000,000 / 42 / 365 = 47.6K b/d).  The technology comes from a different source: Virent, a Marathon subsidiary.  The feedstocks will all be food sources: corn starch, sugar beets, and sugarcane.  Cellulosic crop waste is possible in future (but we’ve seen that technology fail before).

Shell Refinery in Convent, Louisiana

Shell Oil has also been shutting or repurposing crude oil refineries.  Shell’s global strategy is to pair refineries with chemical plants, so that the combined facility can respond to developments and produce a variety of changing and renewable products.  Its Convent refinery on 900 acres alongside the Mississippi River in Louisiana did not fit this strategy.  This was rather a large one at a crude oil refining capacity of 240K b/d.  It became unprofitable during the pandemic and was shut down in November 2020 with the loss of 698 jobs.  Shell turned down two buyers who might have continued refinery operations.

HollyFrontier Refinery in Cheyenne, Wyoming

HollyFrontier (soon to become HF Sinclair with the acquisition of Sinclair Oil) ended its crude oil refining in Cheyenne Wyoming in August 2020, and are working on a restart in 2022 to produce renewable diesel.  The company expects demand from more states adopting the low carbon fuel rules of California – Washington and Colorado, for example, as well as demand from Canada.  The company points out that 56% of the US soy bean crop is exported and might be crushed for fuel instead.  Of course, that exported crop is presumably feeding people and animals.  Rising costs, the coronavirus slow down, and the loss of renewable fuel blending exemption under the Biden administration were factors in the decision.  The restarted plant will employ 80 new workers versus the 200 it employed formerly.  Production volume will drop by about 90%.

Western Refining Gallup, New Mexico

A 65 year old small refinery – one of only two in the state of New Mexico – shut down temporarily in April 2020, and then the company decided on a permanent closure later.  220 jobs and 26K b/d production capacity were lost.

The Mini-Refinery Solution

At VRD, we think we have the solution to this building fuel market crisis: miniature refineries placed near supplies of feedstock and serving the local community.  The particular waste feedstock can vary with the location.  Every location will have an untapped supply of used motor oil.  Our process can handle opportunistic purchases; such as, spoiled seed oils, transmix (accidently mixed fuels), fracking oil, oil pumped out of ships for cleaning of their tanks, and much more.  VRD has the cheapest solution in the world for removing contaminants and lowering the sulfur level in waste oils.  The machinery is relatively cheap and a site can be prepared far faster than competing solutions.  The focus on waste petrochemicals eliminates the food versus fuel competition.

Founder and Inventor at VRD, Timothy D. Wetzel, states:

“The oil industry has been forced into a transition to renewable fuels in response to the political situation.  As a result of this, we are going back to using seed oils and producing them into a diesel fuel by a different process (thermal cracking) than was once used to make biodiesel.  It is now renewable diesel now and into the future.  The problem we face is that there will be a limited amount of seed oils.  Remember that Ukraine and Russia produce 30% of the world’s wheat crop.  That puts the burden on US farmers.

I predicted that we would have shortages of basic commodities: fuel, food, and drinking water.  There is not enough refinable crude oil or seed oils available.  Our interim solution at VRD is to use petrochemical wastes as a feedstock, but the ultimate feedstock will be natural gas.  Natural gas in a liquid form, cleaned, desulfured, and converted into fuel.

It is totally clear to me the path is alternative energy based on a variety of feedstocks and variety of technologies.”

Learn More About VRD

https://www.VegasRenewableDiesel.com/

Renewed Food vs. Fuel Competition Stokes Inflation in Both

History of Biodiesel and the First Food vs. Fuel Competition

First generation biofuels were those made from food crops – principally corn and soy beans; such as, much of the ethanol produced in this United States that is required to be blended with petroleum based gasoline.  Even the Sierra Club recognized that corn based ethanol had harmful land use and environmental effects.

Research continued on what were called second generation biofuels (crop waste, tree waste, municipal waste, non food crops, and more) and third generation (algae).  These have mostly turned into dead ends.  When Abengoa shut down its crop waste to biofuel plant in Kansas in 2015, a local official was quoted as saying that there wasn’t much crop waste anyway – it all gets used in other ways.  Another shortcoming with the concept is that crop waste had to be trucked to the plant from 150 miles all around, making the environmental benefits dubious from all the diesel fuel burnt on these trips.

Algae has fared no better.  We hear occasionally of an improved strain of algae with greater energy potential, but when you create an algae pond in the real world, you find that things eat the algae.  And if you do the math, the entire world would have to be covered in algae ponds due to the low yields from the process.  Popular Science recounts the challenges and current state of algae research.

The New Food vs. Fuel Competition in 2022 and Beyond

Which leaves us stuck with the situation that most biofuels in the US are still being made from food crops.  It seems that the Department of Energy has given up on the idea of solving the food versus fuel competition as it has been promoting the conversion of petroleum oil refineries into “renewable” diesel refineries, where the fuel is made from the same old culprits: corn oil and soy bean oil.  One promoter of the idea remarked that 56% of the US soy bean crop is exported, which might all be made into fuel instead.  But surely that exported soy is being used to feed people or animals.  How is that not a worthy use for a food crop?

United States is Losing Crude Oil Refining Capacity

A big reason for the surge in gasoline and diesel prices in 2022 is the gathering loss of petroleum refining capacity in the US.  The US has lost nearly 5% of its petroleum refining capacity in two years from early 2020 through early 2022.  The impetus was twofold:

• Fuel demand dropped dramatically during the lockdowns in the wake of the COVID-19 pandemic.  Refineries began losing money.  Oil executives began to believe that peak fuel demand had been seen.
  
• The US government’s antagonism toward the petroleum industry convinced oil executives that life would be easier by aligning their strategy with government priorities.  Accordingly, we’ve seen a growing number of conversions of plants from petroleum refining to renewable diesel.

We also saw the largest refinery on the East Coast spectacularly blow up, burn, and close permanently in 2021.

Quick Recovery in Fuel Demand in 2021 and 2022
The economic snapback from the pandemic has been sharp with unprecedented fuel demand without the usual seasonal variation.  The explosion in ecommerce has taxed the transportation and fuel industries to the breaking point.  The remaining crude oil refineries are enjoying record profits.  Regardless, new petroleum to renewable conversions continue to be announced.

Explosions and Conversions of Petroleum Oil Refineries
Let’s review some of the refinery closures and conversions that have taken place in the last couple years.

Philadelphia Energy Solutions Refinery in Philadelphia, PA

Crude oil had been refined on this site alongside the Schuylkill River since 1870.  The company had gone bankrupt in 2018, and then come out of it and reorganized.  It was the largest oil refinery on the East Coast at 335,000 barrels per day capacity on 1,400 acres, employing 1,000 unionized workers.

Then some bad luck struck – a mislabeled pipe, the company said.  On June 21, 2019, a leak of hydrofluoric acid caused a series of explosions, fires that raged all day, and multi thousand pound pieces of metal tanks being flung into the river.  Thankfully, only five workers were injured.

The company expected an insurance payout and planned to rebuild, but within a month it declared bankruptcy yet again.  Two plans competed in the bankruptcy court: a union-backed reorganization and rebuild as a refinery versus a permanent closure and redevelopment of the site.  The old refinery had been the biggest contributor of pollution in the Philadelphia metro, and city government and environmental activists favored redevelopment.  The court chose the redevelopment plan as the least risky.

This was probably a sensible decision from a local perspective, but nationally it was a big contributor to the tightening supplies of fuel and the anticipated diesel shortage on the East Coast in the summer of 2022.

After the Philadelphia debacle, we are seeing a whole bunch of conversions of refineries from petroleum to renewable diesel based on corn and soy.

Phillips 66 Rodeo Renewed Refinery in San Francisco, CA

A conversion was recently announced by Phillips 66 in San Francisco.  Its Rodeo Refinery will be dubbed Rodeo Renewed.  The plant has been in operation for 125 years and was one of five petroleum refineries in the Bay Area.  The crude oil refining capacity was 120,000 barrels per day.  The renovated plant – at a cost of $850 million over 2 years – is projected to produce 50,000 barrels of renewable fuel per day.  The feedstock is the usual suspects: used cooking oil, animal fats, and seed oils.  50K bbd is an ambitious target for a renewable refinery.  The supply of UCO and animal fats are limited.  The difference will have to be made up from food crops at market price.  This is typically what we will see in these refinery conversions: a greatly reduced refining capacity, which exacerbates the trend of declining fuel production capacity in the US overall.

Marathon Dakota Prairie Refinery in Dickinson, North Dakota

 This was a small refinery, but notable for being the first new crude oil refinery to open in the US in 2015 since 1985.  After a couple ownership changes, Marathon Oil decided to convert the facility to renewable diesel with the intention of selling the fuel in California.  Marathon had experienced a period of losses during the pandemic.  The technology for the new plant comes from a Danish firm, Haldor Topsoe, which can convert vegetable oils, animal fats, and used cooking oil into gasoline, diesel, or jet fuel.   Dakota Prairie was rated at a 19K barrel per day capacity in its petroleum days, and this will be reduced to 12K b/d of renewable product.  Used cooking oil and animal fats can’t be stored for long periods that might result from transportation delays, so the bulk of production will presumably come from food crops.

Marathon Refinery in Martinez, California

This was another Marathon facility acquired from Tesoro.  Production will drop from 161K b/d of petroleum product to 730 million gallons per year of renewable product (42 gallons in a barrel, so 730,000,000 / 42 / 365 = 47.6K b/d).  The technology comes from a different source: Virent, a Marathon subsidiary.  The feedstocks will all be food sources: corn starch, sugar beets, and sugarcane.  Cellulosic crop waste is possible in future (but we’ve seen that technology fail before).

Shell Refinery in Convent, Louisiana

Shell Oil has also been shutting or repurposing crude oil refineries.  Shell’s global strategy is to pair refineries with chemical plants, so that the combined facility can respond to developments and produce a variety of changing and renewable products.  Its Convent refinery on 900 acres alongside the Mississippi River in Louisiana did not fit this strategy.  This was rather a large one at a crude oil refining capacity of 240K b/d.  It became unprofitable during the pandemic and was shut down in November 2020 with the loss of 698 jobs.  Shell turned down two buyers who might have continued refinery operations.

HollyFrontier Refinery in Cheyenne, Wyoming

HollyFrontier (soon to become HF Sinclair with the acquisition of Sinclair Oil) ended its crude oil refining in Cheyenne Wyoming in August 2020, and are working on a restart in 2022 to produce renewable diesel.  The company expects demand from more states adopting the low carbon fuel rules of California – Washington and Colorado, for example, as well as demand from Canada.  The company points out that 56% of the US soy bean crop is exported and might be crushed for fuel instead.  Of course, that exported crop is presumably feeding people and animals.  Rising costs, the coronavirus slow down, and the loss of renewable fuel blending exemption under the Biden administration were factors in the decision.  The restarted plant will employ 80 new workers versus the 200 it employed formerly.  Production volume will drop by about 90%.

Western Refining Gallup, New Mexico

A 65 year old small refinery – one of only two in the state of New Mexico – shut down temporarily in April 2020, and then the company decided on a permanent closure later.  220 jobs and 26K b/d production capacity were lost.

The Mini-Refinery Solution

At VRD, we think we have the solution to this building fuel market crisis: miniature refineries placed near supplies of feedstock and serving the local community.  The particular waste feedstock can vary with the location.  Every location will have an untapped supply of used motor oil.  Our process can handle opportunistic purchases; such as, spoiled seed oils, transmix (accidently mixed fuels), fracking oil, oil pumped out of ships for cleaning of their tanks, and much more.  VRD has the cheapest solution in the world for removing contaminants and lowering the sulfur level in waste oils.  The machinery is relatively cheap and a site can be prepared far faster than competing solutions.  The focus on waste petrochemicals eliminates the food versus fuel competition.

Founder and Inventor at VRD, Timothy D. Wetzel, states:

“The oil industry has been forced into a transition to renewable fuels in response to the political situation.  As a result of this, we are going back to using seed oils and producing them into a diesel fuel by a different process (thermal cracking) than was once used to make biodiesel.  It is now renewable diesel now and into the future.  The problem we face is that there will be a limited amount of seed oils.  Remember that Ukraine and Russia produce 30% of the world’s wheat crop.  That puts the burden on US farmers.

I predicted that we would have shortages of basic commodities: fuel, food, and drinking water.  There is not enough refinable crude oil or seed oils available.  Our interim solution at VRD is to use petrochemical wastes as a feedstock, but the ultimate feedstock will be natural gas.  Natural gas in a liquid form, cleaned, desulfured, and converted into fuel.

It is totally clear to me the path is alternative energy based on a variety of feedstocks and variety of technologies.”

Learn More About VRD

https://www.VegasRenewableDiesel.com/