The US move to decarbonize the transportation fuels markets has made allies of two groups historically at odds: refiners and renewable fuel producers. And that relationship is expected to continue to drive US transportation fuel markets in 2025 as demand for both petroleum and renewable fuels is seen higher in 2025.
Spurred by tax credits and incentives, refiners began converting petroleum facilities to make renewable diesel and sustainable aviation fuel as sales of electric vehicles and other non-petroleum powered vehicles continue to rise, threatening transportation fuel demand.
Representatives from both refiners and renewable fuel producers have shown support for Democratic US President Joe Biden’s landmark Inflation Reduction Act of 2022, which offered credits, tax cuts and new spending to increase renewable fuel production.
President-elect Donald Trump, a Republican, made clear that once in office in January 2025 he intends to repeal the IRA despite pleas from Republican lawmakers – particularly those from agricultural states — to not prematurely repeal energy tax credits, which could undermine private investment and development.
Uncertainty as to how this will unfold, combined with the changing of credits under the IRA, remain a major theme for both refiners and renewable producers in 2025.
Lower US refinery runs on closures
US refining margins will be supported by lower refinery runs as well as higher gasoline and distillate demand, industry experts said.
The US Energy Information Administration expects US refiners to process less crude in 2025 than they did in 2024, cutting crude imports by 20% to 1.9 million b/d, from 2.4 million b/d in 2024.
This will lead to the lowest crude imports since 1971, reducing the price of Brent crude to an average of $74/b in 2025, down from the $80/b in 2024, EIA data showed.
In 2025, expectations are for 2025 throughput to average 15.97 million b/d, down from the 16.19 million b/d in 2024 as refineries close. LyondellBasell has said it will shut its Houston refinery by the end of the first quarter of 2025, while Phillips 66 plans to close its Wilmington, California, plant by the end of the year.
US gasoline demand is expected to rise to an average of 8.95 million b/d in 2025, up from the 8.94 million b/d in 2024. Distillate demand will rise from 3.80 million b/d in 2024 to 3.96 million b/d in 2025, while jet fuel demand will rise from 1.70 million b/d in 2024 to 1.73 million b/d in 2025.
PBF CEO Matt Lucey said on Oct. 31 the supply side was impacted by “adverse timing” as planned refinery additions came online in 2024 ahead of the planned refinery shutdowns in 2025.
“2025 is turning to be a more balanced year. 2024 has seen net additions of approximately 1 million b/d. For 2025, the list of closures, or announced, shutdowns across North America, Europe and Asia is approximately 1 million b/d,” he said.
However, a 25% tariff proposed by Trump on imports from Canada and Mexico would drive costs higher for US refiners, who depend on heavy and medium crudes from both countries and would likely pass those costs on to consumers via higher refined-product prices.
Midwest refiners would be especially vulnerable to tariffs, considering Canada supplies 100% of medium and heavy crude imports into the region, according to the EIA.
Credit uncertainty hits renewable production
Renewable-fuel demand was also forecast higher, with renewable diesel demand rising to 240,000 b/d in 2025, up from the 230,000 b/d in 2024. RD supply is expected to rise to 230,000 b/d in 2025, up from 210,000 b/d in 2024, EIA data showed.
Global demand for sustainable aviation fuel will grow to 145,000 b/d in 2026, from less than 20,000 b/d in 2023, according to S&P Global Commodity Insights data, with Europe and the US representing about 90% of total global SAF consumption.
Montana Renewables, the US’ second SAF producer, cut Q4 output due to delayed compliance rules.
As of Jan. 1, 2025, the $1/gal Blenders Tax Credit will end and the new Clean Fuels Production Tax Credit, known as 45Z, will take its place, despite a delay in guidelines from the Treasury.
The credit switchover means that in regards to SAF production “you literally can’t comply with either rule at the end of the calendar year,” said Bruce Fleming, head of Montana Renewables on Nov. 8.
“We are not the only ones who have signaled this and stopped SAF production for a few weeks,” Fleming added.
Renewable jet fuel output dipped to a nine-month low in November, according to the Environmental Protection Agency data. Only 3.6 million gallons were produced in the month, down 61% on the month.
However, S&P Global Commodity Insights has forecast that total US jet fuel consumption will surpass prepandemic levels of 2019, reaching 8 million b/d. Global jet demand in 2024 remains around 95% of 2019 levels due to aircraft efficiency gains.
Source: Platts
