Oil industry faces short-term hurricane impact
While it’s too early to know the full economic and human toll of Hurricane Harvey, we expect a relatively short-term impact on the U.S. energy industry.
According to Bloomberg, police busted two men near a strip-mall dumpster in Knoxville, Tenn., for siphoning used restaurant grease into barrels on their truck. In previous weeks, 44 similar thefts had been reported.
“This grease industry is the wild, wild west,” said Mike Kostelac, president of Millstadt, Illinois-based Ace Grease Service, which collects from restaurants in 12 states. His company’s website has a video of someone stealing their grease.
Stealing old vegetable oil that’s been used to cook chicken nuggets and french fries sounds a little gross. But a black market for the golden gunk is growing as U.S. refiners process record amounts of grease to comply with government mandates for renewable fuels. Last year, 1.4 billion pounds (635,000 metric tons) were turned into biodiesel – or 3.84 million pounds a day.
Most restaurants hire waste handlers to dispose of oil after a few days use. But the National Renderers Association, an industry group, says as much as $75 million is illegally siphoned every year, much of it ending up in refineries. Biofuel prices have been shooting up, boosting the incentive for thieves who are getting bolder and craftier.
With the arrival of spring, licensed collectors are bracing for even more heists. “It’s like crack money,” said Sumit Majumdar, president of Buffalo Biodiesel Inc., a Tonawanda, New York-based collector. “There’s an actual market for stolen oil. It’s almost like a pawn shop or scrap-metal business.”
Biofuel production is now the largest use for old grease, at around 30% of demand. A 2007 energy law calls for American cars, trucks and buses to use escalating amounts of biofuels. Most of that is corn-based ethanol used in gasoline, but refiners also are making more biodiesel. Soybean oil is the primary raw material, followed by used grease and corn oil.
This year, oil companies must use 2 billion gallons of biodiesel, the most ever, according to government data. That’s up from 1.9 billion in 2016 -- and almost nothing a decade earlier.
All that growth has impacted prices. The benchmark for yellow grease in the week ending May 5 was around 25 cents a pound, which is more than triple what it was in April 2000, U.S. Department of Agriculture data show. The commodity got as high as 47.75 cents in 2011, when crude oil was over $100 a barrel and the pump price of gasoline was almost $4 a gallon. (Source: Bloomberg)
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