Consumption of distillate fuel oil in the U.S. West Coast, as measured by product supplied, decreased to its lowest level since 2002 last year and continues its decline this year. The primary cause for the decline is the replacing of petroleum diesel with biofuels, namely renewable diesel, which has gained a larger market share of the region’s diesel pool as clean-fuel programs incentivize biofuels.
Renewable diesel and biodiesel are the two biomass-based diesel fuels that can be used in place of petroleum distillate. Renewable diesel is a transportation and heating fuel that is chemically equivalent to petroleum-based distillate fuel but is produced using fats, oils, or greases rather than petroleum. Renewable diesel is considered a fungible, drop-in replacement for petroleum distillate, meaning it can be used in diesel engines in any concentration. Biodiesel has the same uses as renewable diesel and is made with the same feedstocks, but it is typically blended with petroleum distillate at concentrations of 20% or less for vehicle consumption because of some chemical differences from petroleum distillate. Regardless of whether renewable diesel or biodiesel are blended with petroleum distillate or consumed directly, they generally serve the same end uses and can displace volumes of petroleum distillate.
West Coast distillate fuel oil consumption decreased in 2022 and is on track to be even lower in 2023 (Figure 1). In five months in 2022, distillate fuel consumption in the region dropped below the 10-year (2012–2021) minimums. In the three months of 2023 published in our Petroleum Supply Monthly (PSM), consumption for two months were below 10-year lows, and the average monthly consumption was the lowest for those three months since 2000.
This trend is unique to the West Coast, where most of the United States’ new renewable diesel supply is consumed. Data from the California Air Resources Board and the U.S. Department of Energy’s Alternative Fueling Station Locator suggest that most of this fuel is consumed in California. EIA does not estimate regional consumption of renewable diesel.
In the rest of the United States, distillate fuel oil consumption has been near five-year (2017–2021) averages and has not shown a noticeable trend, aside from returning to pre-pandemic levels (Figure 2). In March 2023, distillate fuel oil consumption in the United States, excluding the West Coast, climbed above its 10-year maximum. This national trend contrasts with that in the West Coast, where consumption dropped below its 10-year minimum. The discrepancy in distillate fuel oil consumption between the West Coast and the rest of the United States demonstrates the general effect of biofuel consumption on distillate fuel oil consumption and indicates most of the renewable diesel produced in the United States is consumed on the West Coast.
Distillate fuel oil consumption generally decreases with increased biofuel consumption because biofuels displace petroleum diesel fuel, and we capture only a portion of biofuel consumption in our published distillate fuel oil consumption statistics. Since 2021, distillate fuel oil consumption includes three subitems: petroleum diesel fuel; renewable diesel refinery and blender net inputs; and biodiesel refinery and blender net inputs (Figure 3). Refinery and blender net inputs are the amounts of renewable diesel and biodiesel that refiners and blenders report that they blended with petroleum distillate. We include these volumes in our distillate fuel oil consumption numbers because they are commingled with the petroleum distillate fuel supply. Although our distillate fuel oil product supplied numbers in our PSM include the biofuel volumes that survey responders identify as blending inputs, they do not include the larger volume of biofuel consumption that is not identified as blending inputs. This volume of biofuels is instead accounted for separately as biofuel product supplied, which is especially apparent on the West Coast data because of high biofuel consumption in California, Oregon, and Washington (where clean-fuel programs provide incentives to use biofuels). Prior to 2021, this volume of biofuels was accounted for as distillate fuel oil adjustments, and it was included in distillate fuel oil product supplied.
We expect that as renewable diesel consumption continues to grow, distillate fuel oil product supplied will continue to decline in the West Coast. Likewise, if renewable diesel consumption extends to other U.S. regions, we expect product supplied of distillate fuel oil to decrease in those regions.
Our Short-Term Energy Outlook (STEO) distillate fuel oil consumption forecast aligns with historical product supplied data from the PSM. In other words, our petroleum distillate fuel oil consumption forecast includes biofuel net inputs but not biofuel product supplied. We do provide a forecast of both renewable diesel consumption and biodiesel consumption. Adding these forecasts to an approximation of petroleum-based distillate fuel consumption (distillate fuel oil product supplied minus renewable fuels except fuel ethanol refinery and blender net inputs) provides a forecast for adjusted distillate fuel oil consumption that includes distillate from both petroleum and biofuels (Figure 5).
For questions about This Week in Petroleum, contact the Petroleum and Liquid Fuels Markets Team at 202-586-5840.
Tags: biofuels, California, consumption/demand, distillate fuel, oil/petroleum, West Coast