Fuel Retailers and Biodiesel Makers Lobby Congress for a Blenders’ Tax Credit — What It Means for U.S. Fuel Markets

Industry push: a tax break aimed at tying biodiesel to everyday pumps

Trade groups for fuel retailers, biodiesel producers and home heating suppliers have sent a clear message to lawmakers: pass a blenders’ tax credit and do it quickly. Their note to Congress frames the credit as a simple, efficient way to keep biodiesel moving through the supply chain — from processors to truck stops to the tanks that heat homes.

The PR campaign is as much about timing as it is about policy. Industry backers want the credit reinstated or extended and made retroactive for the current year so businesses can book relief now. For the companies involved, the ask is aimed at restoring a familiar incentive that removed a wedge between renewable diesel and fossil diesel, making blended fuels more price‑competitive at retail.

How the blenders’ tax credit would work and where it stands

At its core, a blenders’ tax credit is a per‑gallon payment to the company that blends biodiesel into petroleum diesel and sells the finished fuel. Historically, the credit amount has been roughly one dollar per gallon for biodiesel and has been paid to the blender, not the feedstock producer or refiners. That structure targets the point in the chain where fuel gets sold for use, creating a direct incentive to offer blended product to end customers.

Industry materials say they are asking Congress to make the credit retroactive to the start of the year and to extend it for multiple years so buyers and sellers have certainty. The exact bill language, sponsors and timetable vary with each proposal; trade groups are typically looking for quick committee action and inclusion in a larger tax or budget package.

In practical terms, passage would require agreement between House and Senate negotiators and guidance from Treasury and the IRS on eligibility and claiming procedures. Until committees move a bill and leaders agree to floor time, the credit remains a lobbying goal rather than law — and timing is a key uncertainty for markets and companies planning capital or inventory moves.

How the credit would change margins for biodiesel makers and move feedstock markets

If Congress delivers a per‑gallon blender payment, the most immediate winners are firms that can blend and sell diesel fuel with a biodiesel component. Companies that make or supply biodiesel enjoy a clearer outlet and steadier demand for their product when blenders get paid for including it in the tank.

For biodiesel producers such as Darling Ingredients (DAR) and Renewable Energy Group (REGI), the credit would likely raise wholesale demand for biodiesel and improve gross margins — especially when the credit reduces the effective price gap between blended and straight diesel. That said, the benefit is shared across the supply chain: blenders collect the tax credit, which they can use to support price competition at retail or to boost their own margins.

Feedstock markets would react quickly. Soybean oil, used heavily in U.S. biodiesel, and other inputs like used cooking oil and tallow would see stronger demand. Grain processors and merchandisers such as Archer‑Daniels‑Midland (ADM) and Bunge (BG) would feel the pressure: higher demand for vegetable oils tends to lift crude vegetable oil prices, narrowing crush margins for crushers while benefiting upstream oilseed growers.

The amount of feedstock price pass‑through depends on how tight physical supplies are and how flexible blenders are about switching feedstocks. If volumes jump rapidly, feedstock prices could spike, eroding some of the credit’s upside for producers. In short: early gains for biodiesel makers could face margin pressure if feedstock costs climb quickly.

What retailers, truck stops and home heating suppliers should expect

Fuel retailers and convenience stores that sell diesel — from national chains to independent truck stops — are central to the argument for a blenders’ credit. If blenders get a per‑gallon payment, retailers generally have three choices: pass the benefit to customers through lower pump prices for blended diesel, keep the benefit as higher fuel margins, or split the difference to maintain competitiveness.

In many regional markets, price competition at the pump is fierce; retailers may be forced to pass most of the credit through to prices, especially at truck stops where fleet buyers are sensitive to cents‑per‑gallon changes. That would help volumes for blended diesel but compress retail margins.

For home heating oil suppliers, the outcome depends on whether blended heating fuel is practical and accepted by customers in colder regions. A blenders’ credit could modestly lower delivered heating oil bills if the fuel mix expands, but logistical hurdles — storage, seasonal demand swings and consumer acceptance — mean benefits may show up slowly.

Political and implementation risks investors need to watch

There are several ways the plan can run into trouble. First, passage is not guaranteed. Competing budget priorities, objections to tax credits that favor one fuel over another, or concerns over long‑term fiscal cost can stall negotiations. The credit’s fate often depends on whether it is paired with other tax changes or folded into a larger reconciliation package.

Second, implementation matters. Treasury and the IRS must issue rules on eligibility, documentation and how retroactivity is handled. Any ambiguity can slow claims and create disputes between blenders and tax authorities. Timing of guidance — which can lag enactment by months — is a real operational risk.

Third, overlap with other incentive programs complicates the picture. Renewable Identification Numbers (RINs) under the RFS, state biofuel credits, and investment tax incentives for renewable diesel can duplicate or interact with a blenders’ credit in ways that change commercial math. In some cases, firms may not be able to claim multiple subsidies, or one incentive may reduce the market value of another.

What investors should be watching now

• Legislative calendar: committee hearings, bill text and any amendments that change credit size or eligibility.
• IRS/Treasury guidance: watch for draft rules on claiming the credit and for the effective date language that determines retroactivity.
• Feedstock prices: soybean oil and used cooking oil markets will signal whether stronger demand is already priced in.
• Company commentary: listen for management notes in earnings calls from producers (like Darling Ingredients (DAR) and Renewable Energy Group (REGI)), refiners and retailers (such as Valero (VLO) and Phillips 66 (PSX)) about expected volumes, blending capacity and margin plans.
• RIN values and RFS updates: movements in renewable fuel compliance markets can offset or amplify the credit’s economic effect.

For investors, the news is cautiously positive for firms linked directly to biodiesel blending and sales, at least in the short term. But the real payoff depends on how long the credit lasts, how quickly feedstock prices respond, and whether Treasury’s rules make claiming clean and timely. Watch the policy process closely — the window for next‑year planning and plant investments will hinge on whether Congress turns industry lobbying into law.

Sources

• prnewswire.com