Don’t Discard That Waste Cooking Oil, It May Soon Power Your Car

(Bloomberg) -- The oil left over from cooking dinner is becoming a hot niche commodity for a European refining industry that’s trying to combat its carbon footprint.

The continent’s refineries are increasingly turning to used cooking oil, or UCO, as a way to make road fuel in order to cap their carbon emissions. In Rotterdam, prices are about 15% higher than they were a year ago, according to data from SCB Brokers, which specializes in the commodity. By contrast, Brent crude slumped about 30% over the same period.

The relative strength of UCO, which trades at more than twice the price of crude because of government incentives to use it, reflects curbed supply and strong demand, according to Finland’s Neste Oyj, which has become a market leader in renewable diesel. Other refiners in the region such as Poland’s PKN Orlen are exploring the market. The increasing interest has coincided with disruption in availability from restaurants, particularly from China, which is Europe’s biggest outside supplier.

“Waste and residue markets are anticipated to remain tight,” Neste said in its earnings statement on Thursday. “While global availability of waste and residues has been gradually recovering, their demand continues solid.”

Used cooking oil helps the industry to meet European targets on renewable fuels. The environmental benefit that UCO offers means the EU has given it an increased weighting compared with other feedstocks, something that’s known as double counting.

“The long-term outlook for used cooking is extremely positive as EU member nations look to phase out crop-based biofuels in favor of waste-derived fuels,” said Luke Watts, international head of physical biodiesel at SCB Brokers.

Europe’s current target is for 10% of the region’s road fuel by energy content to come from renewable sources including biofuels, according to Fuels Europe, a group representing the region’s refiners. There’s currently no limit on how much UCO can be used to comply with that target. And all of it can be double counted, so producers meet the 10% level with only 5% of UCO. Those rules will soon change.

PKN Orlen is looking at used cooking oil for a biofuels expansion at its Plock refinery.

©2020 Bloomberg L.P.