Used Cooking Oil Prices and Their Role in Sustainable Aviation Fuel

Used Cooking Oil Prices and Their Role in Sustainable Aviation Fuel

The Rising Importance of Used Cooking Oil in Biofuels

Used Cooking Oil (UCO) has swiftly emerged as a critical feedstock in the biofuels industry, particularly with the rapid expansion of Sustainable Aviation Fuel (SAF) as a key growth segment. Both U.S. and European biofuel policies increasingly emphasize the use of non-food-based feedstocks, positioning UCO at the forefront of efforts to reduce carbon emissions and decrease dependence on traditional agricultural commodities. This shift reflects a broader commitment to sustainability and decarbonization within the aviation sector.

The UCO supply chain originates from restaurants, hotels, and food processing facilities, where specialized recyclers collect waste oil and transport it to refineries that convert it into SAF and other biofuels. However, the surge in SAF demand has significantly altered global supply dynamics. Since 2021, the United States has transitioned from being a net exporter to a net importer of UCO, driven by soaring domestic consumption aimed at meeting stringent aviation sustainability targets. To address this growing feedstock deficit, U.S. producers have increasingly sourced UCO internationally, with China supplying approximately 2.8 billion pounds to the U.S. market in 2024 alone.

Geopolitical and Regulatory Challenges

This heightened dependence on global supply chains exposes the U.S. biofuels sector to considerable geopolitical risks. Persistent trade tensions between the U.S. and China, coupled with new policy measures such as the 10% tariff imposed on Canadian biofuels (excluding SAF) in early 2025, have unsettled investor confidence and underscored the fragility of cross-border UCO flows. These developments emphasize the critical need for precise forecasting and strategic planning to secure reliable feedstock supplies for SAF production.

In a significant regulatory development, the U.S. Environmental Protection Agency (EPA) finalized a rule in June 2025 that will exclude Renewable Identification Number (RIN) credits for biofuels produced from imported feedstocks, effective October 1, 2025. This policy shift represents a pivotal moment for the SAF and renewable diesel industries, compelling producers to reevaluate sourcing strategies, cost structures, and investment priorities in light of the changing regulatory landscape.

Supply Constraints and Market Dynamics

Despite robust policy support for low-carbon feedstocks, the U.S. infrastructure for UCO collection is struggling to meet escalating demand. Estimates from Fastmarkets indicate that UCO collection in the U.S. reached 3.3 billion pounds in 2024, significantly below the 5.7 billion pounds required by the biofuel industry. Total UCO consumption in the country is projected to hit 8.4 billion pounds in 2024, marking a 42% increase year-over-year, largely driven by incentives for renewable diesel and other biofuels. The Biden Administration’s ambitious goal of producing 3 billion gallons of SAF by 2030 further intensifies concerns over potential feedstock shortages.

The SAF market faces additional pressures globally. In Europe, SAF prices have surged to levels five times higher than conventional jet fuel, prompting the International Air Transport Association (IATA) to call for urgent policy reforms. Meanwhile, the U.S. Energy Information Administration has lowered its production forecasts for SAF and renewable diesel for 2025 and 2026, indicating a possible deceleration in growth. Nonetheless, the global transition toward electrification and renewable energy—particularly in China, Europe, and India—is expected to accelerate the adoption of advanced biofuel technologies, including SAF, supported by favorable policy frameworks.

As the SAF industry contends with volatile pricing, evolving regulations, and supply chain vulnerabilities, the strategic role of UCO and the imperative for resilient, diversified sourcing remain central to the sustainable future of aviation fuel.