Argentina increases biodiesel blending mandate amidst fuel shortage crisis

Argentina government has raised the biodiesel blending mandate for small and medium-sized companies to 7.5% for 60 days, the energy ministry announced in a statement on June 15.

All supplier companies will be allowed to use an additional 5% of biodiesel for blending mixture with diesel bringing overall proportion of biodiesel to 12.5%, the ministry said.

This is a hike of at least 50% from current biodiesel blending mandate of 5%. As per market sources, the move came on backdrop of surging diesel demand which surpassed last year and lead to fuel rationing in some areas. The blending mandate increase will lead to tighter global supplies of soybean oil from the leading exporter as the oil derivative of raw bean are major feedstock for biofuel production in country.

Diesel shortages have already disrupted operations of county's economically vital soybean and its product export complex operations such as for harvesting and crushing for oil and meal derivatives.

"The global energy situation today presents scenarios of scarcity together with high diesel prices, the domestic demand for diesel has faced increases of more than 14% during the first four months of the year, compared to the same period of the previous year," said the ministry statement.

The 12.5% blend of biodiesel will comprise an increase from 5% to 7.5% for the allocation for smaller and medium domestic companies from which oil companies are obliged to buy from first for diesel blending.

The additional 5% blending allocation is expected to be undertaken by larger international companies serving export markets.

However, it was unclear whether the entire 12.5% blend would be mandatory or whether some portion of it would be optional for fuel suppliers. Also, the ministry did not specify when the new mandate would take effect.

Argentina has the availability of raw material and biodiesel production capacity to replace more than 1 million tons of diesel imports with a 100% nationally manufactured product, according to a report by the chamber of the Argentine oil industry released on June 7.

In June 2021, Argentina reduced the share of biodiesel blending into diesel from 10% to 5%.