Energy Dominance

By Donnel Rehagen, CEO

As Americans begin their summer travel plans, energy security is an unavoidable discussion topic. U.S. fuel prices have increased 50% since the start of March as global oil trade came to a standstill in the Strait of Hormuz.

Consumers are feeling pain at the pump when they fill their personal vehicles. They are reliving it at the grocery store or even when shopping online, because nearly every consumer item they purchase is delivered on trains, ships, and over-the-road trucks powered by diesel. And diesel supplies were already constrained before the Iran war.

Biodiesel and renewable diesel are now an essential part of the U.S. supply of diesel fuel, as shown in the graph below. Our industry has built 7 billion gallons of domestic production capacity - sufficient to meet 10% of the nation's demand for diesel fuel. While policy uncertainty throughout 2025 undercut our production, the policy outlook for 2026 favors our resurgence, likely to record production levels. Our industry's contribution to U.S. fuel supplies is crucial to keeping the U.S. economy moving.

The Renewable Fuel Standard plays a fundamental role in supporting domestic fuel production. And it is vital to protecting Americans from the financial and energy security risks that come with our continued reliance on the global oil market. In setting RFS volumes for 2026 and 2027, EPA acknowledged that America is vulnerable to supply and price disruptions because the global oil market is heavily influenced by OPEC countries, including Iran. The agency estimates that the final RFS rule will reduce dependence on foreign oil by 300,000 barrels per day compared to 2025 - or 3.5 billion gallons of gasoline and diesel per year for both 2026 and 2027.

"Ensuring a growing supply of domestically produced renewable fuels is a key component in meeting the statutory goals of increasing the energy independence and security of the United States. Increasing domestic production of renewable fuel also contributes to unleashing American energy production towards the goal of achieving energy dominance." - EPA, RFS Program Standards for 2026 and 2027

EPA got it right when it set the 2026 and 2027 biomass-based diesel volumes based on our domestic capacity to produce the fuels. As the agency noted in the rule, this approach "is consistent with the statute's goals of increasing energy independence and security and the Administration's goals of achieving energy dominance." This is a 180-degree change in EPA's approach to setting RFS volumes - a change that Clean Fuels has advocated for a long time.

In previous years, EPA set biomass-based diesel and advanced biofuels volumes below what our industry had already demonstrated was achievable. That approach failed to maximize domestic production and use of clean fuels - it in fact encouraged some U.S. producers to develop export markets. To meet the 2026 and 2027 volumes they set, EPA estimates that U.S. biodiesel and renewable diesel producers will need to run at 90% of capacity - a tall order, but one we welcome.

There are reasons to be optimistic about U.S. producers' ability to ramp up production to respond to the moment. For example, imports of biodiesel and renewable diesel are still minimal under the current policy incentives, as shown in the graph below. And exports of both biodiesel and renewable diesel are still occurring, indicating domestic demand is being met by domestic production and export opportunities still exist.

Consumers may not notice the price benefit right now with U.S. oil prices over $110 per barrel. But increasing production and use of renewable fuels here in the United States also can dampen price impacts from oil market shocks.

We saw this in 2020 as the COVID epidemic turned fuel markets upside down. In the wake of that market disruption, Clean Fuels worked with the World Agricultural Economic and Environmental Services (WAEES) to analyze the benefit for American fuel prices from increasing biodiesel and renewable diesel supplies. The WAEES study, "The Offsetting Impact of Expanded Biomass Based Diesel Production on Diesel Prices," showed that the additional supply from U.S. production of clean fuels consistently reduced distillate fuel prices. When biodiesel and renewable diesel reached 6% of the U.S. market, the price of oil was 4% lower than it otherwise would have been, according to WAEES.

EPA's analysis of the 2026-2027 RFS rule exposes similar dynamics associated with U.S. exposure to global oil markets. EPA - and researchers at Oak Ridge National Lab - found that U.S. consumers benefit from an "oil security premium" as renewable fuels reduce reliance on foreign oil. The average benefit of the increased RFS volumes over the next two years, EPA projected, will be $3.68 per barrel of oil.

Reducing reliance on foreign oil by 300,000 barrels per day adds up to hundreds of millions of dollars per year in benefits for the U.S. economy, as shown in the figures below from EPA's Regulatory Impact Analysis.

And at the pump where energy security matters most, B20 (20% biodiesel) blends have been $0.11 per gallon lower on average than petroleum diesel since 2017, according to the Department of Energy's Clean Cities and Communities.

America's discussion about energy security and energy dominance should continue even after there is a resolution to the war and a resumption of global oil flows. Producing and using better, cleaner fuels generates economic benefits for everyone. EPA's course change for the RFS maximizes those benefits - particularly for rural communities and U.S. farmers. It's a course Clean Fuels will continue to advocate.

ABOUT CLEAN FUELS ALLIANCE AMERICA

Made from an increasingly diverse mix of resources such as recycled cooking oil, soybean oil, and animal fats, the clean fuels industry is a proven, integral part of America's clean energy future. Clean Fuels Alliance America is the U.S. trade association representing the entire biodiesel, renewable diesel and sustainable aviation fuel supply chain, including producers, feedstock suppliers and fuel distributors. Clean Fuels receives funding from a broad mix of private companies and associations, including the United Soybean Board and state checkoff organizations.

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