At Greg’s Petroleum Service, we know fuel isn’t just what keeps your trucks, equipment, and fleets moving — it’s the heartbeat of your business. That’s why we keep a close eye on changes in the fuel market, especially when it comes to renewable diesel. Over the past few years, renewable diesel has been one of the fastest-growing alternatives to conventional diesel, but the first quarter of 2025 told a different story.

Production dipped sharply, showing just how sensitive this market is to government policy and profitability. But before we dive into what happened and what’s ahead, let’s break down why renewable diesel matters for folks who rely on reliable, clean, and efficient fuel every day.

What exactly is renewable diesel?
Renewable diesel is not the same as biodiesel. It’s made from feedstocks like used cooking oil, animal fats, and vegetable oils, but through a process called hydrotreating, it comes out chemically identical to petroleum diesel. That means it can go straight into your tanks and engines without any blending limits, modifications, or headaches.

Biodiesel, on the other hand, is usually blended at up to 20% because of chemical differences. That makes renewable diesel a genuine “drop-in” replacement, which is a massive advantage for truckers, equipment operators, and fleets that can’t afford downtime or complicated fueling logistics.

The benefits of renewable diesel don’t stop there:

  • Lower emissions: Renewable diesel can cut greenhouse gases by up to 80% over its lifecycle compared to petroleum diesel.
  • Cleaner burning: Fewer particulates and nitrogen oxides mean better air quality and less wear on engines.
  • Regulatory compliance: It helps fleets meet California’s Low Carbon Fuel Standard (LCFS), the federal Renewable Fuel Standard (RFS), and other clean fuel rules.

What happened in early 2025?
The start of 2025 was rough for renewable diesel producers. According to the U.S. Energy Information Administration (EIA):

  • Renewable diesel production dropped 12% compared to early 2024.
  • Compared to late 2024, production was down almost 25%.
  • Biodiesel took an even bigger hit — production in January fell to its lowest point since 2015, about 40% lower than the year before.

So why did production slump? Two big reasons stand out:

  • Tight Profit Margins – Even some of the biggest names in the industry felt the squeeze. Diamond Green Diesel, for example, posted an operating loss of $141 million in the first quarter of 2025, a sharp drop from $190 million in operating income during the same period in 2024. Phillips 66 and Marathon also reported losses in their renewable diesel operations, and trade reports indicate that biodiesel producers were struggling with negative margins as well.
  • Policy Uncertainty – Up until 2024, producers received a $1 per gallon Blender’s Tax Credit. In 2025, that was replaced with the Section 45Z Clean Fuel Production Credit under the Inflation Reduction Act. Instead of a flat credit, the new system ties incentives to the carbon intensity of feedstocks. Fuels made from cleaner sources like used cooking oil get a bigger credit than those made from less sustainable inputs.

Sounds good in theory, but here’s the catch: in late 2024, the IRS and Treasury were slow to release final guidance on how the credit would actually work. Without clarity, producers had no idea if they’d make money or lose money, so many cut back or idled plants.

Major agriculture companies, including Cargill and Bunge, slowed their soybean buying due to this uncertainty, which dampened feedstock demand and affected renewable diesel production. Typically, by mid-October, most fuel retailers have procured about 80% of their feedstocks for the coming year, but in late 2024, only about 10% had been acquired due to uncertainty.

Until guidance was issued, producers were essentially flying blind. They didn’t know how much credit they could claim based on carbon intensity, which made it difficult to decide how much feedstock to buy or at what price to sell fuel. This uncertainty directly shaped the 2025 market and the significant production dips we saw at the start of the year.

What’s next for renewable diesel?
Even with a rocky start, renewable diesel isn’t going away, and the market is likely to stabilize as the year progresses. Production capacity has grown nearly 20% since early 2024, meaning plants are ready to ramp up once policies and profitability become clearer.

The overall picture points to continued growth. The EIA expects renewable diesel production to climb about 5% in 2025 compared to last year, while biodiesel may drop roughly 15% as some less competitive plants could close for good.

For truckers, fleet managers, and equipment operators, this means renewable diesel is set to become the more reliable biomass-based diesel moving forward. Its “drop-in” compatibility and lower emissions make it a solid long-term choice, especially in California, where demand is strong and regulations favor cleaner fuels. Companies that invest in renewable diesel now may benefit from both stability and compliance as the market evolves.

What this means for your fleet
Renewable diesel provides a cleaner, engine-ready fuel that can slide right into your operations without any hassle. While production was bumpy in early 2025, the long-term outlook is solid. Businesses that start adapting now could gain a competitive edge as regulations tighten and demand for low-carbon fuels continues to grow. By staying informed on policy changes and keeping an eye on feedstock availability, your business can take full advantage of what renewable diesel has to offer.

At Greg’s Petroleum Service, we’re here to help. Our team is dedicated to guiding California fleets through this evolving market for renewable diesel. We track policy updates, monitor production trends, and make sure the fuels you depend on, from renewable diesel to conventional diesel, are available when and where you need them.

Because at the end of the day, our mission is simple: keeping your business moving.