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Primer on Fuels: Diesel and Advanced Renewable Biofuels

Diesel’s sustainability is enhanced through the engine’s increasing efficiency - lower greenhouse gas emissions - and its ability to use low-carbon advanced biofuels like blends of high-quality biodiesel and renewable diesel fuel.

Unlike gasoline, diesel fuel and the vehicles and equipment it powers is the platform of work. About one out of every two sectors of the economy rely on diesel. Diesel engines, old and new, are capable of operating on high quality advanced biofuels including biodiesel and renewable diesel fuel delivering sustainability at low cost.

Diesel fuel and engines are often described as the platform of work. Diesel fuel is the most energy dense transportation fuel available, and the diesel engine is the most efficient means to transfer this energy density into useful work, while gasoline is almost exclusively used in the fleet of passenger vehicles.

energy density graph

Heavy-duty trucks, buses, as well as emergency service vehicles, locomotives, marine vessels, ferries, agricultural and construction equipment and large stationary industrial engines, all rely primarily on diesel power. Powering these large sectors of the economy requires large amounts of energy. Let’s take a more in-depth look at the market for these fuels.

 Consumption of Diesel Fuel by End UseSource: U.S. Energy Information Administration

Petroleum Diesel Fuel

The major feedstock for the standard diesel fuel sold in many markets in the U.S. today - ultra-low sulfur diesel fuel (ULSD) - is crude oil. While new found sources of domestic crude oil have expanded recently, crude oil is also a global commodity. According to the most recent data published by the U.S. Energy Information Administration, the oil and gas industry produced 328 million barrels of crude oil as of August 2020 and imported 22 million barrels. Beginning in 2006, U.S. Environmental Protection Agency required the use of ULSD in the fleet of on-road vehicles with a full transition to ULSD only for all uses on- and off-road in 2010. U.S. refiners produced over 107 million barrels and exported 6.5 million barrels of ULSD in 2019, according to the U.S. Energy Information Administration.

Diesel fuel is mostly derived from crude oil and is considered a middle distillate as the fuel is condensed from the middle section of the distillation tank during the refining process. Other middle distillates include jet fuel, home heating oil, kerosene and other fuel oils. Gasoline, the major petroleum product derived from a barrel of crude oil, is made from lighter portions of crude oil during the refining process.

Today, diesel fuel is widely available for fuel users. Just over half of all fuel retailers offer a diesel pump at retail fuel locations such as convenience stores. Heavy-duty users, including trucks, buses and off-road equipment have easy access to diesel fuel through truck stops and travel centers, proprietary fuel locations, and fuel delivery services.

Petroleum Products by Barrel

As crude oil is the major feedstock to petroleum diesel fuel, changes in the price of crude oil help explain some of the changes in the price of diesel fuel. Other variables beyond the cost of refining also contribute to the price of fuel including distribution, marketing as well as state, federal and sometimes local taxes. Since October 1, 1997, the federal government has imposed a 24.4 cents-per-gallon tax on diesel fuel compared to an 18.4 cents-per-gallon tax on gasoline. Almost every state also levies a diesel tax the average of which is 26.25 cents per gallon. On average, state, federal and other motor fuels taxes results in about 62 cents per gallon levied on the sale of a gallon of diesel fuel. This compares to 55 cents per gallon for gasoline.

Diesel Prices follow Crude

Changes in the demand for diesel also explain some fluctuation in the price of diesel fuel. Seasonal variation in the price of diesel fuel may also be explained by the use of diesel in specific sectors. The use of diesel fuel in agricultural equipment during the fall and spring harvest seasons and the use of home heating oil (another use of diesel fuel) in the Northeast can explain some season fluctuation in the price of diesel fuel. The sudden downturn in the demand for freight traffic during March 2020 owing to the COVID-19 pandemic was a leading variable that explained a sudden drop in the price of diesel fuel. 

Price Consumption of Diesel FuelDiesel fuel prices nationwide are expected to bottom out at about $2.50 per gallon falling from just over $3 per gallon in 2019, according to the U.S. Energy Information’s Short Term Energy Outlook. Prices are expected to remain flat as demand for diesel and production slowly rebound during 2021 after severe disruptions in fuel markets in 2020 owing to the COVID-19 pandemic.

Advanced Biofuels: Biodiesel and Renewable Diesel Fuel
Originally designed to operate on peanut oil, the diesel engine patented by Rudolf Diesel over a century ago today has evolved dramatically in many ways. Today, ultra-low sulfur diesel fuel powers most diesel engines around the world, but diesel engines remain capable of using high quality blends of biodiesel and renewable diesel fuel in both new and existing engines of all ages and types. 

Most heavy-duty diesel engines are capable of operating on blends of biodiesel up to 20 percent, or B20. Some new or newer diesel engines are approved to operate on higher blend levels. Renewable diesel fuel is produced to meet the same engineering standard as petroleum diesel fuel and can be used as a 100 percent replacement fuel to petroleum.

Both biodiesel and renewable diesel fuel are derived from waste agricultural feedstocks, oil derived from soybeans and corn and waste animal fats make up the largest feedstock for these fuels, according to the U.S. Energy Information Administration. As long as we produce soy for animal feed and other uses, producers of biodiesel and renewable diesel fuel will have access to feedstocks.

Biodiesel Feedstocks

Source: U.S. Energy Information Administration

Relative to petroleum diesel fuel, the consumption of these advanced biofuels is relatively small but growing. As of May 2020, 147 million gallons of biodiesel was consumed. This compares to 4.5 billion gallons of ULSD petroleum diesel fuel consumed during the same period. While the price of biodiesel varies across the country, the Department of Energy in its most recent alternative fuel report, estimates the biodiesel (B20) is sold at about a $0.30/gallon discount to petroleum diesel fuel.

The consumption of renewable diesel is much smaller and currently used primarily by fleets and focused in a few states and regions that incentivize low carbon transportation fuels. The Department of Energy in its alternative fuel report estimates that renewable diesel fuel is sold at a $0.20/gallon discount to petroleum diesel fuel.

Advanced Biofuels Deliver Big Benefits at Low Cost
Both biodiesel and renewable diesel fuel are considered advanced biofuels by the U.S. Environmental Protection Agency defined as reducing greenhouse gas reductions by at least 50 percent. Renewable diesel fuel is capable of reducing greenhouse gas emissions upwards of 80 percent. The use of these fuels is generating large greenhouse gas reduction benefits with least cost compared to other alternatives.

The federal Renewable Fuel Standard (RFS) mandates the use of certain biofuels blended into petroleum-based diesel and gasoline in an effort to grow domestically sourced fuel with the capability of reducing greenhouse gas emissions. Nationwide, the Renewable Fuel Standard requires the use of biofuels, including biodiesel and renewable diesel fuel. Both California and Oregon requires the gradual reduction in the carbon content of transportation fuels sold in the state through Low Carbon Fuel Standards.  Biodiesel and renewable diesel fuel are generating the greatest reduction in greenhouse gas emissions in the transportation sector. In California, these benefits exceed those from the electrification of cars, trucks and buses by almost 4:1.

 Alt Fuels GHG Contributions

SOURCE: Low Carbon Fuel Standard Dashboard

A key advantage to the use of renewable biofuels is that compared to competing alternatives, they do not require the purchase of new vehicles, equipment or engines nor do they require expensive additional investments in refueling or recharging infrastructure. Their benefits can be realized immediately across entire fleets of vehicles, rather than only in newly acquired vehicles dependent on new infrastructure. Biodiesel and renewable diesel fuels can be stored, used, pumped and handled virtually the same way as petroleum diesel products.

Driving a global economy requires a steady supply of available, affordable and diverse energy sources. As the prime mover of the global economy, diesel technology continues to evolve to use the fuels more efficiently and with fewer emissions.  That’s why the new generation of diesel engines, fuels and equipment will continue to play a dominant role powering essential services and key sectors of the economy. In the future, we can expect to see more alternative fuels hit the marketplace including zero-emissions technologies including battery electric and hydrogen fuel cell trucks and some equipment. As these alternatives make some in-roads, ULSD and advanced biofuels will still play a dominant role in our economy.


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