Diesel Goes Green While Stocks See Red
Renewable diesel made from animal fats and plants is fueling trucks on both coasts. New York City said this past week that its heavy vehicles, like garbage trucks and ambulances, will be running on renewable diesel by the end of June. New York officials believe in the fuel so much they’re willing to pay up for it: The first shipment, sent by barge from Louisiana in September, cost $4.81 per gallon. Diesel’s retail price at the end of September was $4.59 a gallon.
In California, biofuel accounts for over half of the diesel consumed. “California has been a huge success story through its low-carbon fuel standard,” says Tudor Pickering Holt’s Matthew Blair. Oregon and Washington also have standards that mandate carbon-emitters to buy credits to offset emissions.
Renewable diesel supply has been soaring. At the start of 2023, U.S. plants could make three billion gallons annually, up from 1.75 billion in 2022 and 791 million in 2021. Italian energy company ENI and U.S. refiner PBF Energy opened a new Louisiana plant this year that will pump out 300 million gallons annually once it hits full capacity. Marathon Petroleum is completing a 730-million-gallon facility in California with Finland’s Neste.
Supply is growing so fast that it’s outpacing demand and hurting margins and share prices of biofuel producers like Darling Ingredients and Neste. The hope is that California speeds up carbon reduction and a new market develops: renewable jet fuel.
Write to Avi Salzman at [email protected]
Last Week
Markets
Gold hit a high, and Bitcoin topped $44,000, up over 166% for the year. Moody’s cut China’s credit rating from stable to negative. Stocks sank, then rallied, with oil and Treasury prices rising. Mortgage rates fell again, and November jobs, at 199,000, rose, aided by strike settlements. On a quiet week, the Dow Jones Industrial Average ticked up 0.01%, the S&P 500 rose 0.21%, and the Nasdaq Composite gained 0.69%.
Companies
A Hong Kong court gave China Evergrande more time to work out its debt restructuring. Spotify cut some 17%, or 1,500, of its global workforce. S&P Global said Uber Technologies will join the S&P 500 index, along with manufacturers Jabil and Builders FirstSource. Elon Musk’s artificial intelligence company, xAI, is looking to raise a billon dollars. AT&T tapped Ericsson to build a new, $14 billion U.S. wireless network. Meta Platforms and IBM are forming a network to build an open model of AI.
Deals
Alaska Air said it would buy Hawaiian Holdings for $1.9 billion…Shareholders of Australia’s Origin Energy blocked a $13 billion takeover bid by a Brookfield Asset Management group…Two other Aussie energy giants, Woodside Energy and Santos, said they were in merger talks…Roche announced it was acquiring weight-loss drugmaker Carmot for $3.1 billion, including milestone payments…AbbVie said it had signed a $8.7 billion deal for neuroscience drugmaker Cerevel, hard on the heels of its $10 billion ImmunoGen purchase, announced on Nov. 30.
Write to Robert Teitelman at [email protected]
Next Week
Monday 12/11
Three megacap companies announce quarterly results, including two software providers trying to ride the AI wave. Oracle reports after the close on Monday, and Adobe does the same on Wednesday. Costco Wholesale rounds out the week on Thursday. The companies’ shares are up 39%, 81%, and 34%, respectively, this year.
Tuesday 12/12
The Bureau of Labor Statistics releases the consumer price index for November. Consensus estimate is for a 3.1% year-over-year increase, one-tenth of a percentage less than in October. The core CPI, which excludes volatile food and energy prices, is expected to rise 4%, matching the October figure. The annual percentage change in the core CPI is at its lowest level in more than two years.
Wednesday 12/13
The Federal Open Market Committee announces its monetary-policy decision. The FOMC is widely expected to leave the federal-funds rate unchanged at 5.25%-5.50%. The debate on Wall Street has shifted to how many times the Fed will cut interest rates next year, as there is near-unanimous agreement that there will be no more rate hikes for this cycle. Traders are currently pricing in at least one percentage point worth of rate cuts by the end of 2024.
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