My Top Three Takeaways From the Bloomberg Farm, Food, and Fuel Summit 2025

April 14, 2025/Hoekstra Trading LLC/

Number 3 — Confusion reigns

At a conference in September, 2024, a panelist said,

“Biofuels is a difficult place to work”

At the time, that struck me as a concise understatement about the biofuels business environment.

The same feeling was in the air at two other conferences in January covering California’s biofuels regulations, and again last week at the Bloomberg Farm, Food, and Fuels Summit 2025 in Indianapolis, where the “normal” difficulties were amplified by constantly changing tariffs.

Several presenters admitted they had to scrap their planned presentations, based on overnight news from Washington, and would be improvising on the stage instead. There was a sense that confusion reigns.

There was a sense that confusion reigns

Number 2 — Watch for E15

Many drivers don’t know the gasoline we pump into our cars, SUV’s, and pickups contains 10% ethanol (E10). Even fewer know much of that fuel does not meet specifications. That’s because much E10 is granted a waiver on compliance with hard-to-meet summer gasoline specifications.

Several Midwest states have now chosen to opt out of that waiver this summer, meaning their gasoline must now meet the actual summer specifications.

The news is that, in recent weeks, some refiners and blenders started offering a new refined gasoline blend that, when blended with either 10% or 15% ethanol, meets the actual specifications, without requiring a waiver.

In recent weeks, some refiners and blenders started offering a new refined gasoline blend that, when blended with either 10% or 15% ethanol, meets the actual summer specifications, without requiring a waiver.

This new refinery gasoline opens the door to further increase the benefits of ethanol in gasoline. How does that work? Ethanol is an outstanding octane additive. At the 10% level, ethanol already supplies much of the octane our vehicles require that was formerly provided by higher octane refinery gasoline. At the 15% level, (E15), ethanol supplies even more octane, which means the newly-introduced refinery gasoline blend, when dosed with 15% ethanol, can be even lower octane. That reduces refining cost and helps relieve octane-bottlenecked refineries in summer.

This sharing of the octane load between ethanol and our refineries gives E15 a substantial cost advantage versus E10, which should accelerate E15 adoption.

How big is the octane benefit of ethanol? Watch for quantitative analysis on the economics of ethanol octane, coming soon from Renewable Fuels Association.

Number 1 — Upside down economics

Close to 80% of diesel fuel sold in California comes not from petroleum, but from bio feedstocks like soybean oil and used cooking oil. These bio feedstocks come at more than double the cost of petroleum diesel (counting just the feedstock costs, not including the costs of converting them to fuels).

Consequently, on a free-market basis, bio-based diesel producers lose money hand over fist. This is what I call upside-down economics. None of these producers would exist, or could survive, without ongoing government subsidies to offset their large free market losses.

In the past, US biofuels have been granted a $1.00 per gallon subsidy commonly known as the blenders tax credit (BTC). The BTC has now been replaced with a far more complex credit called the clean fuels production tax credit, commonly known as the 45Z tax credit.

When you dig deeper into these credits, you learn the (now defunct) BTC came to producers as a simple cash payment, $1.00 per gallon, by check in the mail. But the 45Z credit is an income tax credit.

We who pay income taxes know they come laden with ifs, ands, buts, whys, wherefores, and loopholes. That is true big time with the 45Z. It’s fine print requires running complex computer models on cradle-to-grave global warming impacts of different biofuel feedstocks, to figure out the credit’s value.

So far, that’s all old news. What I didn’t fully appreciate until last week is that the 45Z credit, being an income tax credit, has no value to pure biofuel producers who pay no income tax (because, as stated above, they have negative free market profit margins, so have negative taxable income).

The 45Z credit, being an income tax credit, has no value to pure biofuel producers who pay no income tax

Instead of getting a simple dollar-per-gallon cash subsidy, and in addition to massive complexity in figuring the 45Z’s value, they must now try to sell the credit to someone who does pay income tax (and so can use the credit), which is hard to do even when they do know what it’s worth.

The Trump administration seems interested in tax simplification — they swept away lots of income tax complexity when they raised the standard deduction to previously unseen heights in Trump’s first term, eliminating the need for many of us to track itemized deductions, and now they are talking about eliminating income tax liability altogether for those earning under $150,000, which would really simplify things: income tax = $0.00.

I wonder if they’re considering re-instating the simple BTC and scrapping the 45Z, in the name of tax simplification?