Surging US demand for renewable diesel has not prompted plans for more capacity from fuel producers uncertain of how long the appetite will last.
US refining executives this summer warned that the pace of renewable fuel use would fall short of record government-mandated consumption imposed in April. Domestic production of renewable diesel, a drop-in fuel driving refiner compliance with state and federal road fuel requirements, shot to record volumes in June.
But five years after intensifying state road fuel requirements spurred a build out of the renewable diesel capacity powering today's production, the largest US producers have made no plans to expand further. Fuel makers blame an uncertain policy outlook as they wring more out of existing equipment. Executives instead have focused on reducing mandates they say could ultimately add to gasoline prices.
"If there's not some level of relief legislatively, I fear that it is a race to the top in terms of pricing," HF Sinclair chief operating officer Steve Ledbetter said.
State and federal biofuel blending requirements lifted corporate renewable fuel businesses from a dismal 2025 to bumper second-quarter 2026 profits. Marathon Petroleum's renewables segment, which reported a $110mn loss in 2025 and $150mn loss in 2024, notched a $258mn quarterly operating profit, Phillips 66 reported that its first unadjusted quarterly profit for renewable fuels since 2024 was also its largest so far.
Renewable diesel production soared with rising blending incentives.Prices for federal Renewable Identification Number credits generated from supplying renewable diesel increased by 38pc through the second quarter after regulators nearly tripled minimum blending requirements for biomass-based diesel this year.
The incentives added to tougher targets for state low-carbon fuel standards (LCFS) in California and Washington. The combination of federal and US west coast state programs helped support the build out of current capacity beginning in 2021. Renewable diesel today generates the largest share of credits to comply with California and Oregon programs, and a significant share toward Washington's carbon reductions. US west coast states accounted for nearly four out of five gallons of all renewable diesel consumed in the US during the first quarter.
Refiners have repeatedly warned that the federal mandates outstripped renewable diesel supply. But the returns have not inspired plans for additional capacity to satisfy demand. Over and over, executives this earnings season laid out spending plans that are limited to maintaining operations instead of adding to them.
"We have no change in the way that we're thinking about capital in that particular segment," Marathon Petroleum chief executive Marianne Mannen said. "Efficiency only, as we said at the beginning of the year."
Wariness that effective production capacity today exceeds what the industry had previously estimated tempered some of that interest. Domestic renewable diesel production surged higher by almost 30pc to a record 263,000 b/d in June after the US finalized blending mandates at the end of March. Some of that included facilities running above their planned capacities during the quarter.
"What we're seeing is nameplate capacity is a number, and companies are able to overachieve that when the operating environment is positive," Bob Day, chief operating officer of Diamond Green Diesel joint venture partner Darling Ingredients, said in July.
But today's demand signal grows fuzzy through the end of the decade.
California, where the state LCFS and cap-and-invest programs have added incentives to make renewable diesel and other alternative fuels more competitive, adopted rules to limit crop-based diesel replacements beginning in 2028. That change for the first time separates state LCFS incentives from federal tax incentives for domestic, crop-based feedstocks.
Federal biofuel blending requirements continue to grow next year. But regulators must legally finalize blending mandates for 2028 and 2029 by the end of October, and the US Environmental Protection Agency (EPA) has given no hint of a proposal so far.
EPA may yet limit credits for imported fuel or imported feedstocks to produce renewable dieselin the US, complicating supply chains for added domestic capacity.
If current mandates do add to retail gasoline prices — as refiners seeking to reduce the requirements warn — political pressure could scale back conditions supporting higher runs.
"Regulatory certainty is seen as essential for fostering innovation and securing investment in renewables," Phillips 66 said in response to questions about expansion interest.
