The price of biodiesel (B30), a blend of 30% used cooking oil and 70% very low sulfur fuel oil (VLSFO), temporarily became $74.61 per ton cheaper than traditional VLSFO in Rotterdam in April. This calculation includes costs related to the European Union's Emissions Trading System (ETS) and potential FuelEU Maritime penalties.
Price Changes in the Marine Fuel Market
In the three months prior to this change, the price of biodiesel B30 was between $11 and $27 per ton more expensive than traditional VLSFO. Additionally, the price of 100% biodiesel (B100) was temporarily cheaper than marine diesel for eight weeks between March and May, accounting for carbon costs.
Impact of the Closure of the Strait of Hormuz on the Energy Market
This sudden price change occurred due to the closure of the Strait of Hormuz and the rise in fossil fuel prices. Between February and March, the average price of diesel in Europe increased by $476 per ton, while the price of UCOME only rose by $65.
This report titled "Lessons from Hormuz: Disruptions in the Competitiveness of Renewable Fuels" indicates that carbon pricing is gradually effective in creating commercial competitiveness for renewable marine fuels. However, the authors caution against interpreting these numbers as a sign of a permanent change.
Overall, biodiesels are still generally more expensive than conventional marine fuels before accounting for carbon costs. Rotterdam comparisons also include potential regulatory penalties that do not necessarily reflect the costs imposed on each vessel.
This study was conducted by David Elward, Senior Analyst at General Index, and Tim Dihan, Senior Analyst at LSEG, and examines the various responses of renewable fuels to energy shocks. While traditional biodiesels were relatively resilient, the prices of hydrogenated vegetable oil and sustainable aviation fuel (SAF) surged significantly.
SAF prices increased by $636 per ton between February and March; however, the supply chains for these fuels were largely independent of the Strait of Hormuz. The findings also show an increasing disparity between maritime and aviation transport. While EU carbon regulations temporarily made marine biodiesel fuels the cheaper option, researchers estimate that to reduce the gap between SAF and conventional jet fuel, carbon prices would need to reach around $445 per ton of CO2 equivalent.
