Philip: Hello, and welcome to part one of a two-part Argus Americas "Biofuels" podcast. I'm Philip Goughary, Business Development Manager, Renewables and Biofuels, with Argus Media. Renewable diesel production has reached record levels in the U.S. this year, but market dynamics have hardly been straightforward. California has experienced periods of unusually tight supply and elevated prices. Imports have declined, exports have increased, and Texas is beginning to emerge as another outlet for renewable diesel. Joining me for this special two-part series, to explain these developments, is Jasmine Davis, Associate Editor for U.S. Renewable Diesel at Argus. Jasmine also covers conventional diesel markets on the U.S. West Coast. Jasmine, welcome.
Jasmine: Thanks, Philip. It's great to be here.
Philip: Well, I appreciate you taking the time, but before we get into the market, could you briefly explain to our listeners what you cover exactly, and how renewable diesel fits into your broader reporting?
Jasmine: Sure. So, like you said, my main point is I cover U.S. renewable diesel for the Argus Americas Biofuels Report, with a particular focus on California's spot R99 markets. I also cover our conventional ultra-low-sulfur diesel markets on the U.S. West Coast, so that's LA, San Francisco, and Portland. And those markets are all closely connected, because renewable diesel and conventional diesel are often competing for the same buyers, and they respond to many of the same supply conditions. And aside from that, I also do moonlight as our U.S. West Coast jet fuel reporter as well. So, all of the middle distillates out west.
Philip: So, Jasmine, let's begin with the broader picture, then. How would you characterize the U.S. renewable diesel market this year?
Jasmine: The main thing that's separating 2026 from 2025 is 2025 was a year of really widespread uncertainty in renewable diesel. And this year, we've received a lot more policy clarity. Most notably, that's going to be your 2026-2027 renewable volume obligations, or RVO, and developments surrounding the 45Z tax credit. Those incentives together have supported domestic renewable diesel production, which has reached record high levels this year as a result. At the same time, we've had some more physical shifts in the market, so not just policy. So, California did lose a significant amount of its conventional refining capacity, from the tail end of 2025 into early 2026. We estimate that in the realm of about 17% to 18% of the state's crude processing capacity, across two refinery closures in California. So, that reduced the amount of spare capacity available on the conventional side, when refineries experience maintenance or upsets. And essentially, what we say is there's very little slack remaining in the system in California. And the result of that is that what might have otherwise been a relatively small upset or a hiccup in production in California can have these really outsized impacts on supply availability, and therefore the spot markets now, because we just don't have a lot of that spare crude processing capacity to pull from.
And because these markets are connected, like we said before, what's going to impact your conventional diesel markets is going to impact your renewable diesel markets, and vice versa, to a degree. So, we've therefore seen two somewhat contrasting conditions in 2026. At times, California demand and liquidity has softened enough to encourage renewable diesel movement into Texas, which I'm sure we're gonna get into later, as the incentive for producers remained strong. And that's going back to those policy updates that we just touched on. But also, exiting the summer, and this is more in line with that reduced slack in the system, we had an R99 supply squeeze, and record high cash prices, on the heels of interruptions at both conventional and renewable sites in California. We've seen increased availability since then, as renewable diesel production recovered into the end of the third quarter, the end of the summer. And that realignment in the supply balance is also being helped by declining diesel demand, as we exit this peak fall harvest period in California.
Philip: Wow, I appreciate that. Thank you. I mean, I think that anybody involved in the California market is well-versed at how quickly conditions can change. And I'm very, very impressed at your ability to keep track of each and every nuance of that. But the relationship between conventional diesel supply and renewable diesel bulk pricing I think can sometimes seem confusing, especially for people that are new to the market. Can you dive into why the loss of conventional refining capacity matters so much to renewable diesel?
Jasmine: Yeah. So, they are distinct products, but the markets are closely linked. The way that I think about these, to help make sense of it, is you think of CARB diesel and renewable diesel as a dyad. So, any move on one side of that dyad is going to have an impact on the other side. In California, renewable diesel and conventional CARB diesel are serving, often, the same pool of buyers. And that's kind of the whole, that's renewable diesel's whole shtick, is it's a drop-in replacement for CARB diesel. But that does mean that if conventional diesel becomes scarce, if there's less CARB diesel available, like what we've seen in San Francisco over the last couple years, there's less ability on the buy side to toggle away and between renewable diesel, in a situation where you might want to, say, if renewable diesel becomes quite expensive, or if there's a refining hiccup.
Conversely, if renewable diesel supply gets tight, that's going to increase your demand for conventional diesel or that CARB diesel a lot of the time. So, that relationship, like we said earlier, it means that interruption on one side is going to have an effect on the other product, whether that's an issue at a conventional refinery somewhere in California, or if we see a problem with production of renewable diesel in the Bay, or even production of renewable diesel out in the Gulf Coast, since that's another main supplier of RD out West.
Philip: Wow, interesting. You know, so, recently, you and I both had the privilege of being out in Monterey, California, to meet with participants in the renewables market at our annual North American Biofuels, LCFS & Carbon Market Summit that we put on. You, Jasmine, gave a presentation, yeah, that showed a significant rise in Los Angeles and San Francisco R99 prices, heading into September of this year. Can you tell us a little bit from that presentation what was driving, what was really the driving force, rather, behind the increased prices?
Jasmine: Yeah, sure. So, that was a lot of things happening simultaneously. You might think of it as a perfect storm, or, in more generic market-speak, I was having a lot of conversations in August and September with folks who were saying, "I don't wanna say that everything that could go wrong has gone wrong, because then I might summon a fourth horseman," so to speak. But that was kind of the attitude we were in as we came into the end of the summer in the renewable diesel space, where it was really just, there were a lot of things moving at once, and all of it was really working together to contribute to those record high prices that we were seeing.
So, that being said, looking at all those different parts, it might be easiest to start with a macro view, and zoom in from there. The first thing you need to understand about the renewable diesel prices out in California is that everything is ultimately pinned to the NYMEX ULSD contract. And the NYMEX ULSD contract is the basis against which CARB diesel trades in California. So, when we're looking at this kind of tail end of the summer period of really intense volatility on the West Coast, you had NYMEX ULSD futures rose very sharply, and that's part of the volatility that we've seen since the beginning of the war with Iran, so it's something that's really characterized 2026. But that NYMEX increase lifted the conventional CARB diesel prices in Los Angeles and San Francisco, which is the biggest piece of the sort of R99 pricing pie. And because the CARB diesel value is that big component, you're already getting kind of a baseline elevation in the price. So that's going to translate to a higher renewable diesel price, even before you factor in things that might influence the actual differential for renewable diesel trade in the spot market.
So, zooming in a step closer, second, we have that regional renewable diesel supply tightness. Back in August, we had a major biorefinery turnaround, that really curtailed California output of renewable diesel for a time there. And on top of that, we had unrelated production problems out along the Gulf Coast. So all of that's gonna feed into our third point, which is that discount for California R99 that we talked about, how it trades relative to CARB diesel, really narrowed as we got into August. So, with conventional diesel supplies also tight, buyers had a lot less flexibility to substitute away from renewable diesel as well, so you saw this elevated kind of pricing basis, and on top of that, a narrowing discount for renewable diesel against that basis. Together, those pushed LA head-of-the-pipeline R99 to a record high of $5.57 per gallon, and San Francisco also to a record high of $5.62 per gallon by the beginning of September.
Philip: Well, I think the one thing that separates engineers from market participants in commodities trading is a definition of Murphy's law. I think it means very, very different things to different people. So, tell us, Jasmine, was that mainly a renewable diesel story, or was that part of a wider California fuel story?
Jasmine: Not to be biased by the fact that I'm covering renewable diesel and conventional diesel, but I really, when it comes to renewable diesel in California these days, I don't think there is such a thing as mainly a renewable diesel story. I mean, a renewable diesel story is a CARB diesel story. A CARB diesel story is a renewable diesel story. And all of it's impacting your overall diesel pool. So, yes, renewable diesel had its own supply constraints, but the record cash prices were also tied, fundamentally, to that higher CARB diesel value, which was tied to everything that was happening in global energy futures markets. The distinction is important, still, because an R99 price can rise even if the renewable diesel-specific portion is relatively stable. So you can have renewable diesel priced consistently at, say, a 20 cent discount to CARB diesel, but you can still see volatility in that cash price because you're sort of, you're married to the trajectory of CARB diesel, and underneath all of that, the NYMEX ULSD contract settlement. But, because the underlying conventional diesel basis is such a large component of that final value, that is really what kind of opens the gate into these big swings that we've seen this year.
Philip: California was clearly experiencing tight conditions, but if you look at the national production data, it certainly tells kind of a different, or at least differing, story. So, how much renewable diesel is the U.S. producing as a whole?
Jasmine: Yeah. So, we find that the most reliable way to look at this is looking at RIN generation data. So, specifically, we're looking at the D4 RIN generation data to keep tabs on renewable diesel output. And U.S. monthly renewable diesel production reached nearly 7.9 million barrels in June, which is the highest that we have on record. And that growth is reflecting those stronger policy incentives for domestic production, including that federal biofuels mandate that we touched on earlier. But strong national output doesn't necessarily mean that every single one of your spot markets is going to be well-supplied all of the time, especially with the distribution of renewable diesel production in the U.S.. We do have a local hub in San Francisco, but then if you were to look at Los Angeles, one of the things that makes fuel trade in general so complicated in California is you have these huge metropolitan areas, in LA and San Francisco, that are not connected by pipeline. So you have this hub of renewable diesel production in the Bay Area, and then relatively little renewable diesel production in Southern California, aside for, if you're accounting for Bakersfield, which isn't on the pipeline system. So, just because you're producing a lot of renewable diesel doesn't always mean that you're going to be well-supplied in every single area. So, on top of just that inherent infrastructure challenge that we have with California, you've also just got logistics, refinery interruptions, and where that product is available, like, if there's an issue in California, but we're still producing healthily along the Gulf Coast, I mean, that's volume that's pretty far away on the Gulf Coast. It takes time to get to California. So there can be regional tightness, even when production is quite high. And with those interruptions, like what we saw in August, with the curtailment, the severe curtailment in California, it takes time to get product from the Gulf Coast over to the West Coast, even if we weren't having simultaneous scattered issues on the Gulf Coast as well.
Philip: Whenever you see production increasing, and in this case, as you noted, record production, you most certainly have to have supply that needs that production. And even with the tightness that you're talking about in certain regions of the U.S., if we continue zooming out, and look at sort of a high-level view of the national picture, imports have fallen, and our exports are still rising, or at least they have been rising. So, what's changed there?
Jasmine: So, to answer that question, we need to look at two things. One is going to be a pretty specific policy shift, and the other is going to be something that's true of commodities, which is, just because California wants renewable diesel does not mean that that is your best netback all the time. If you're a producer at the Gulf Coast, California is, we call California king for renewable diesel consumption in the U.S., but that doesn't mean that all of your product's always going to go to California. We have healthy export trends into Canada, whether that's British Columbia, East Coast Canada, we go into Europe. So you're looking at the return for these refineries, wherever they're located in the U.S..
But back to that specific policy shift, we need to talk about the expiration of the Blenders Tax Credit. So, that really changed the economics of importing renewable diesel into the United States, and, for a while, effectively, shut out large streams of imports. Like, right now, there's a pretty big news story in the California renewable diesel market, which is that we're starting to see renewable diesel from Singapore landing along the California coast for the first time in a long time. And that's because, with the loss of that BTC credit, it just became much less incentivized to import renewable diesel. And that's part of what characterized that 2025 really lack of clarity in the market, what made it so difficult, was we were no longer really incentivizing imports, but we also didn't have that policy clarity, in the shape of the RVO, and in 45Z finalizations, that would have lent the support to domestic production. So, that was kind of our limbo year.
And this is more of our, we-kind-of-know-what's-going-on-federal-policy-wise year, and we're starting to see things, we think, head toward something of a new normal. All of that being said, imports averaged around a million barrels per month in 2024, which was the last year that we still had the BTC. And that rate tumbled to about 287,000 barrels a month throughout 2025, and it averaged just 158,000 barrels a month during the first quarter of 2026. So, quite the difference in imports. But exports moved in the other direction. So, from January to June, U.S. renewable diesel exports averaged about 1.2 million barrels a month, which is about 25% over the same period in 2025. And most of that volume is gonna be going into Canada. But again, we also do have export markets that we look to across Europe.
Philip: Well, that's all the time we have for the first part of this two-part series. Be sure to listen to our second episode, where Jasmine takes us on a deeper dive into the California market, illuminates new and emerging markets for domestic renewable diesel, and helps us understand the status of the United States as a major producer and consumer of this very important fuel. Jasmine, thank you so much for sharing your time and expertise with us today.
Jasmine: And thank you all for having me.
Philip: If you'd like to learn more about renewable diesel, the Argus Open Markets platform, or any of the other prices, data, or products we offer, visit https://www.argusmedia.com/en.There, you can find details on renewable diesel, under methodology, and key commodity prices. Also, please don't hesitate to get in touch at oil-products@argusmedia.com.
