- The Oil Patch
- Posts
- 🛢️ SoCal Biodiesel: Out of Fuel
🛢️ SoCal Biodiesel: Out of Fuel
DoE Can’t Find 3 Million Barrels of Oil for the SPR

Good morning; here's what the Oilman has for you today:
California’s Biodiesel Market on the Brink of Collapse
DoE Can’t Find 3 Million Barrels of Oil for the SPR
Tweet of the Day

California’s Biodiesel Market on the Brink of Collapse
The green fuel credit market in California is teetering on the edge after a crash in credit prices that nobody saw coming.
Basically, biodiesel has become so popular in California that the market’s about to collapse under its own weight.
It’s actually the credits that are so popular
Here’s how the system works:
Biodiesel producers get credits from the state for their output. They then resell these credits to regular refiners to reduce their carbon footprint.
It’s a pretty lucrative business, and it’s led to a surge in biodiesel production.
Of course, it would; it’s free money!
It has also led to a surge in biodiesel sales in California: half the nation’s biodiesel supply ends up there.
And people say they’re surprised that the credit price collapsed.
It must have been obvious that the more biodiesel gets sold, the more credits get issued.
Supply and demand – it’s as simple as that.
The carbon credit crunch is threatening “low-carbon” projects
Some renewable energy companies in California rely on high credit prices to make their projects economical.
Now, these companies risk going under because with credit prices tanking, “economical” goes out the window.
Sound familiar?
Sure it does. It’s the same picture with all renewable energy projects.
Without heavy subsidies, they’d be dead on arrival.
As Warren Buffett put it eloquently a few years ago, “On wind energy, we get a tax credit if we build a lot of wind farms. That's the only reason to build them. They don't make sense without the tax credit.”

Today's Edition is Brought to You By Energy Builders Podcast
Are you ready to dive into the exciting world of oil and gas? Look no further than Energy Builders, your go-to podcast for all things black gold.
Get an inside look at the entrepreneurs making waves in the industry and learn from the drillers and deal-makers who know how to make a profit in the field. Don't miss out on this action-packed listening experience – tune in to Energy Builders now and discover the secrets of success in the oil and gas business.
Listen on Apple Podcasts, Spotify, and more.

DoE Can’t Find 3 Million Barrels of Oil for the SPR
Three million barrels: that’s how much oil the Department of Energy announced it would buy as the start of refilling the Strategic Petroleum Reserve.
As a reminder, last year, it drained more than 200 million barrels from it.
And there’s not enough crude even for those three million barrels.
Not all crudes are created equal
There’s plenty of light, sweet crude in the U.S.
What there isn’t enough of is medium sour crude, which is what the DoE is trying to source for the SPR.
And because there isn’t enough of that particular crude, guess where prices are heading?
That’s right: above the range that the administration set for its SPR refill purchases. That is was between $67 and $72.
Imagine if they’d announced they’d start with 10 million barrels instead of 3…
Will the SPR ever be refilled?
At this point, it’s hard to say – and getting harder.
The news of that 3 million barrels pushed oil prices higher despite the measly volume.
But unless the DoE wants to spend 50 years restoring the SPR to where it was before, it would have to buy bigger volumes…
…If and when they become available.
Supply of medium sour crudes is so tight they’re about to start trading at a premium to light, sweet crudes at some point.
And the DoE picks that precise moment to start buying oil for the SPR.
Talk about timing.
But no, the truth is, there will be no good time to start buying. It will always impact prices.
This may turn the SPR refill operation into a mission impossible.

Around the Global Patch
🇮🇳 India abolishes crude oil windfall tax: boosting economic growth.
🇧🇷 Petrobras unveils exciting pre-salt discovery in Brazil.
🇮🇶 TotalEnergies poised to launch multi-billion dollar projects in Iraq.

Tweet of the Day
Ever seen a drilling rig crawl? #OFS
— De La Rosa (@Tejanobrown)
11:14 PM • May 17, 2023

Thanks for reading today's Oil Patch!
Stay oily, my friend.
Two quick requests before you go:
If you found this useful, forward this email to a friend to spread the word. 👇
Take 1 second to answer the poll below, and please tell us what you think 👇👇
What do you think of today's edition? |

Interested in sponsoring The OilPatch?
Reach out for our media kit and to learn more about sponsorship opportunities.