Biofuels are making up an increasing share of total distillate fuel oil consumed in the United States. Beginning in the September 2024 Short-Term Energy Outlook (STEO), we began publishing forecasts for several new series that help to better capture how biofuels are being consumed and overall demand for distillate fuel oil, a classification of petroleum products that includes diesel, fuel oil, and heating oil.
We made these changes to clarify how much biofuel is included in petroleum products, particularly distillate fuel. These updates are largely based on data series we were already reporting in our Petroleum Supply Monthly (PSM) and forecasting in STEO. The new data are available in STEO Table 4d.
The most notable of the new series is total distillate fuel oil consumption. The total distillate fuel oil consumption calculation includes distillate fuel oil product supplied (published in PSM and STEO) and two new data series:
- Biodiesel product supplied
- Renewable diesel product supplied
How did we previously account for diesel consumption in STEO?
Previously, we only published distillate fuel oil product supplied (the proxy we use for consumption) in STEO Table 4a. These data included volumes of biodiesel and renewable diesel reported to EIA as refiner and blender net inputs. Net inputs are the volumes of these fuels that refiners and blenders report that they blended with petroleum distillate. We include these volumes in our distillate fuel oil product supplied data because they are commingled with the petroleum distillate fuel supply. However, distillate fuel oil product supplied does not include the biofuel consumption that we report as standalone biodiesel product supplied and renewable diesel product supplied, although much of these volumes are likely blended with petroleum-based distillate fuel further downstream of the data captured in our surveys. Because distillate fuel oil product supplied does not include significant volumes of biodiesel and renewable diesel, it does not capture the total volumes of fuel being consumed as distillate fuel oil.
What are biomass-based diesel fuels?
Renewable diesel and biodiesel are the two biomass-based diesel fuels that can be used in place of petroleum-based 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 can be used in diesel engines in any concentration.
Biodiesel is made with the same feedstocks as renewable diesel, 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-based distillate.
Why are we publishing a new total distillate fuel oil series?
We chose to publish a total distillate fuel oil consumption series because biofuels are making up a noticeable and increasing share of distillate supplied to the market. Most of this growth is occurring on the West Coast because of state-level policies in that region, most notably California’s Low Carbon Fuel Standard, that add to the incentives from federal clean-fuel programs such as the Renewable Fuel Standard and biodiesel tax credit.
We estimate the average share of biofuels in total distillate fuel oil consumption was about 4% from 2016 to 2020. Recently, rising production of renewable diesel has increased the biofuels share of total distillate fuel oil consumption from 5% in 2021 to 7% in 2023.
Renewable diesel product supplied has more than tripled from nearly 70,000 barrels per day (b/d) in 2021 to 240,000 b/d so far this year, as an influx of private investment helped increase production capacity. We expect the biofuels share of total distillate fuel oil consumption will increase to 9% in 2024.
Total distillate fuel oil consumption better measures distillate consumption in the market because of the growing share of biofuels in distillate supplied to end users. Distillate product supplied data (which capture petroleum-based distillate fuel and only the portion of biofuel blended as net inputs) over the past five years suggest distillate consumption has not recovered to 2019 levels. However, the total distillate fuel oil consumption series that more fully accounts for biofuels shows distillate consumption surpassing 2019 levels in 2022.
Several macroeconomic indicators that drive distillate consumption (including U.S. real GDP, U.S. real imports of goods, and manufacturing activity as measured by the Federal Reserve’s Industrial Production Index) all surpassed 2019 levels by 2022, lending support to total distillate fuel oil consumption as a more appropriate measure for distillate consumption.
In the first half of 2024, distillate fuel oil product supplied suggests consumption declined 5% compared with the past five-year (2019–23) average. Total distillate consumption over the same period shows consumption was effectively the same as the five-year average. The difference between the two reflects the biofuels share of distillate consumed in the market.
We have revised our forecasting method for distillate consumption to better account for biofuels in distillate supplied to the market. We now forecast total distillate fuel oil consumption using macroeconomic indicators to determine overall consumption by end users. We forecast distillate fuel oil product supplied by subtracting our forecast for renewable diesel product supplied and biodiesel product supplied from our total distillate fuel oil consumption forecast.
