Thursday, October 13, 2005

The Reality of B100 Pricing in Northern California

As President of the San Francisco Biofuels Co-op, I am often asked, why is the price of biodiesel so high and why have prices stayed high after the introduction of the federal excise tax credits.

The short answer is supply and demand. Demand for biodiesel has increased greatly over the last year. Supply, while increasing rapidly, has not increased rapidly enough to keep up with demand. Northern California fits this profile, but has the added complication of lack of local production. All of our biodiesel has to be brought in via truck or railcar, which further increases the price.

Here is the current pricing breakdown:

SFBC Fuel Pricing

Wholesale Price to Our Local B99.9 Fuel Distributor $ 2.855

California Diesel Fuel Tax $ 0.180

California Sales Tax (8.5% of price not including CA diesel fuel tax) $ 0.291

Federal Excise Tax $ 0.244

Less, IRS Tax Credit $ (0.500)

Total $ 3.070

Price to SF Biofuels $ 3.450

Distributors Margin $ 0.380

SF Biofuels Mark-up $ 0.150

Sweat Equity Price $ 3.600

SF Biofuels additional Non-sweat equity mark-up $ 0.250

Non-Sweat Price $ 3.850


Blogging Blogging Queen said...
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The Propel Project said...

"Less, IRS Tax Credit $ (0.500)"

The IRS tax credit should be less 0.99, unless the biodiesel is produced from WVO, in which case it should be cheaper.

Eric Bowen said...

The biodiesel is made from waste cooking oil, so the credit is $0.50. It is blended to B99.9, so I guess the actual number is 99.9% of 50 cents, but I rounded up for simplicity.

The Propel Project said...

The cost of the WVO "feed stock" vs. virgin oil is significant. WVO is considerable cheaper. Sounds like the producer is making a larger margin than most. Do you know the producer/distributor chain that is delivering to you? B99 from virgin oil, including shipping from producer, is much cheaper than your price in most of the US. I may be missing some taxes specific to your region tho...

Eric Bowen said...

You are correct. We are being hosed. The price should not be where it is at, but we currently have no production here in Northern California, and we have high demand, so we are forced with this unfortunate market dynamic. Several producers should be coming on line here in 3-9 months, so things should improve. In the meantime, we are shopping for a better price from a different producer.

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ShaqDiesel said...

What would the breakdown be for the price of soy-based B99 be? I know the blenders credit would go to 0.99, but how do you calculate the excise taxes, etc?

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