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How Biodiesel Can Help Increase Your Fuel Margins

Posted in: Fuel and Trucking, Biodiesel

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/// Guest post by contributor Renewable Energy Group

Winter is finally in the rearview mirror and the busy summer travel season is almost here. This is the time of year many of the travel centers REG works with increase their biodiesel blend levels to take advantage of the economic benefits the renewable fuel brings.

And let’s be honest, even with the positive performance and environmental benefits of biodiesel, if the fuel did not make economic sense, retailers would not sell it. The good news is that biodiesel can help your bottom line. Here’s how.

Cost-effective solution
First, biodiesel is often cheaper than petroleum diesel throughout the U.S. thanks to the value of Renewable Identification Numbers (RINs). 

Additionally, the higher the blend of biodiesel, the greater the potential for savings because you’re getting more of the economic advantage of biodiesel. For example, when I look at rack pricing at a Chicago terminal, I often see B5 (meaning it has 5 percent biodiesel and 95 percent petroleum diesel) at one price, B11 at a lower price and B20 even lower — and all three are lower than the price of ULSD.

Tax incentives
The example does not even take into account federal and state incentives for selling biodiesel. Several states have established tax incentives specifically for retailers. Here are three examples:

  • Illinois — Retailers are exempt from 20 percent of the state’s 6.25 percent sales tax for selling biodiesel blends of 1 to 10 percent. There’s a full exemption of the sales tax for B11 and higher.
  • Texas — Biodiesel and the biodiesel portion of a blended fuel are exempt from the state fuel tax. With B100, retailers can save up to 20 cents per gallon.
  • Iowa — Retailers get a tax credit of 3.5 cents for every gallon of B5-B10 sold. That goes up to 5.5 cents per gallon on blends of B11 and higher, plus a tax differential of 3 cents per gallon for a total savings of 8.5 cents per gallon.

With retailers often measuring fuel margins by the penny, the financial advantages of biodiesel can add up fast.

Increased customer base

There are also harder-to-define financial benefits with biodiesel. The one I hear repeatedly from travel centers and c-stores is that a diverse fuel lineup brings more drivers to their pumps. That in turn can increase the number of people heading inside your stores to make a purchase.

That’s been the experience at Sapp Bros., Inc., which operates travel centers from Pennsylvania to Utah and participated in NATSO’s Food and Fuel Study Tour last summer.

“At our travel centers, having a diverse lineup of fuels attracts a bigger customer base,” says Kevin Cassidy, vice president – Sapp Bros. Travel Centers. “Besides filling up with fuel, they’re inside your stores. They’re shopping, maybe getting something to eat. There are benefits to bringing in new faces.”

If you’d like to discuss the financial benefits biodiesel could potentially bring to your locations, please feel free to contact me at (515) 239-8166 or Troy.Shoen@regi.com.

Renewable Energy Group. REG is a leading North American advanced biofuels producer and developer of renewable chemicals. REG utilizes a nationwide production, distribution and logistics system as part of an integrated value chain model to focus on converting natural fats, oils and greases into advanced biofuels and converting diverse feedstocks into renewable chemicals. Learn more about Renewable Energy Group.

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About the Author

Troy Shoen

Troy Shoen

Troy Shoen has been an expert in marketing various aspects of the advanced biofuels industry for the past seven years. For six years he managed marketing efforts for a biofuels feedstock and animal feed ingredient company before joining Renewable Energy Group as Senior Manager, Marketing in July 2015.

He currently leads the efforts to promote the economic and value-added benefits of integrating biodiesel into distributor and retailer fuel programs.  

Troy holds a Master’s in Business Administration from the University of Iowa in addition to Bachelor Degrees in Journalism and Communication Studies.