Chevron Halts Biodiesel Production Amid Market Challenges, Unveils Green Hydrogen Initiative

Chevron Corporation (NYSE:CVX) has idled two biodiesel production facilities in the U.S. Midwest, the company confirmed yesterday, owing to imperfect market conditions.

In 2022, the second-largest oil producer in the United States acquired Renewable Energy Group, a biodiesel manufacturer, for $3.15 billion, aiming to increase its renewable fuels output to 100,000 barrels per day by 2030, Reuters reported. This acquisition included 10 biodiesel plants and one renewable diesel facility.

Chevron halted operations at its plants in Ralston, Iowa, and Madison, Wisconsin, which collectively have a capacity to process 50 million gallons of biodiesel per year, the report stated. 

As of December, biodiesel production capacity in the United States was estimated at 2.07 billion gallons by the government, Reuters noted.

Biodiesel, derived from agricultural oils and animal fats, incurs higher production costs compared to petroleum-based diesel; however, it serves as a cleaner burning fuel. Moreover, biodiesel production generates credits that can help offset production expenses, Reuters added.

In recent months, biodiesel prices have declined due to increased supplies, coupled with a decrease in the value of renewable credits, which recently hit a three-year low, the outlet noted.

The price of a blend containing 20% biodiesel dropped to $3.45 per gallon of gasoline equivalent last month, down from its peak of $4.80 per gallon in October 2022.

Of the recent developments for Chevron, on March 1, Chevron New Energies, a branch of Chevron U.S.A. Inc., revealed plans for a 5-megawatt hydrogen production initiative in California’s Central Valley. 

The project seeks to produce lower carbon energy by harnessing solar power, land resources and non-potable produced water sourced from Chevron’s existing assets at the Lost Hills Oil Field in Kern County. 

The production of low carbon intensity (LCI) electrolytic hydrogen will involve electrolysis, a process that utilizes electricity to separate water into hydrogen and oxygen.

Price Action: CVX shares closed higher by 0.53% to $152.81 on Friday.

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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