By Michael Devine
In suburban Connecticut and many other Northeastern suburban communities, the latest buzzwords to describe the current local economy is the “new normal.” Thousands of independent, small and medium-sized businesses are facing extraordinarily sized contractions to their sales and revenues. Financial services firms, real estate and construction companies, retail main street businesses and service companies are financially suffering to the tune of 30 to 50 percent declines in revenues over the past 5 years. The reality of high unemployment and reductions in consumer spending are beginning to settle into the current economy. We all hope this economic correction will end soon, but there are few, if any, optimistic signs in the new normal.
In 2010, the U.S. biodiesel industry also experienced a drop in domestic gallons produced and distributed, largely due to the failure of Congress to reinstate the $1 per gallon biodiesel blenders excise tax credit, and key market segments such as Bioheat are feeling its effects. The independent retail oilheat marketer is not insulated from the new normal. With the family budget under siege, conservation at home is having a significant impact on overall gallons sold. Other constant economic challenges for the oilheat marketer are sudden commodity changes in the price of oil, poorly hedged contract positions, natural gas competition and even Mother Nature, as temperatures fluctuate. Now more than ever, the oilheat industry must recreate its brand image. Integrating biodiesel into the existing petroleum infrastructure provides the oilheat marketer a new, improved liquid fuel for the existing oilheat consumer. In this fast-changing world, Bioheat represents a sustainable growth opportunity, presenting the independent oilheat marketer opportunity to grow and green their business in the new normal.
For marketers and distributors searching market certainty in uncertain times, Bioheat has become a significant beneficiary of the RFS2 rulemaking process. U.S. EPA now recognizes biodiesel as an advanced biofuel. Heating oil integration is allowable under RFS2 and provides an opportunity and a likely source for many mandated biodiesel gallons in coming years. The term Bioheat is a registered industry trademark whose definition is ASTM D396 heating oil blended with ASTM D6751 biodiesel.
RFS2 and renewable identification number (RIN) markets provide certainty for the long-term usage of biodiesel—Bioheat marketers can feel secure about marketing this renewable energy source. Another benefit of the new RFS2 rules is that all of the new regulatory reporting, RIN tracking calculations and other compliance regulations are all handled upstream between the biodiesel producer or importer and the oilheat and diesel fuel terminal suppliers. The oilheat marketer will continue to purchase Bioheat through its current petroleum suppliers, with regulatory reporting and RINs calculations in most cases already figured into the wholesale pricing, eliminating pricing confusion.
This past spring and summer, I spoke with numerous oilheat dealers at petroleum industry conferences, state association meetings and in several private discussions. I clearly sensed some concern from them about the future of biodiesel, because of the absence of the tax credit and the availability of ratable biodiesel supply. The truth is, with RFS2, a Bioheat marketer now has the ability to market an advanced biofuel to the consumer. Biodiesel is a liquid drop-in fuel of the highest quality; a renewable energy that possesses a minimum 50 percent reduction in carbon emission compared to distillate fuel. This reduction calculation takes into account indirect land use criteria as well as the life-cycle analysis of biodiesel.
Biodiesel is one of the few renewable energy technologies that has made its way out of the lab as a theoretical application, to become a viable renewable energy. Bioheat is ready for primetime distribution and consumer use today in existing heating equipment—without any modifications.