Fuel refiners including Marathon Petroleum and ExxonMobil are adding “renewable diesel” to their product mix in response to government incentives for cleaner fuels. The raw materials are typically edible oils extracted from plants or animal fat.
The push has alarmed food companies coping with record prices for many edible oils this year. But the energy sector is just whetting its appetite in the vegetable oil market, according to analysts and public announcements from refining companies.
“We support renewable fuels and the green agenda, but soyabean oil [prices] have tripled. Our members are worried that they may not be able to buy any oil,” said Robb MacKie, chief executive of the American Bakers Association.
The trade group, which counts Krispy Kreme, Bimbo Bakeries USA, and Pepperidge Farm as members, recently met officials at the US Environmental Protection Agency to urge lower federal mandates for biofuels.
Food groups have long opposed biofuels targets in the US, notably over corn ethanol mandates that were sharply raised in 2007. This time the focus has shifted to the feedstocks for diesel-type fuels used in heavy-duty vehicles.
In food and agricultural circles, “it’s become the diesel vs doughnuts debate as food and fuel compete for that oil”, said David Widmar, an agricultural economist and consultant.
The US Department of Agriculture predicts the price of soyabean oil will average 65 cents a pound this year, more than double the price of two years ago.
Krispy Kreme, the New York-listed doughnut company, last month cited “significant commodity cost pressure, particularly from edible oils” as it raised prices. “I must admit the commodity pressure in the short-term has just been quite extraordinary,” chief financial officer Josh Charlesworth told analysts.