Cooper: blenders have financial opportunity with Bioheat

By Luke Geiver | October 19, 2011

When Michael Cooper, vice president and director of sales and trading for Ultra Green Energy Services LLC, started his career in biodiesel-blended heating oil sales, a potential buyer picked him up at a New York airport and explained what it would take to use biodiesel-blended heating oil provided by Cooper. “When the buyer picked me up,” Cooper explained during the Northeast Bioheat Workshop in October, “the first thing he said to me was, ‘Michael, which side is the penny on? If this product is a penny more than heating oil, then I’m not going to buy any of it, and if it is a penny less, I will buy it all.’”

Although that conversation took place nearly 10 years ago, Cooper said the same penny-mantra still applies—but there are also several other factors that can either help or hinder the use, growth and overall profitability related to biodiesel-blended heating oil. “We can’t just put it all in black and white,” he explained.

One of the largest opportunities to grow the amount of biodiesel blended into heating oil happens with the blenders, Cooper pointed out. “Obligated parties are only going to blend the minimum amount to meet their mandate, get their RINs, or meet whatever self-imposed limitations they have on pipeline transportation, for instance,” he explained. Those same parties, most of whom are in the Gulf Coast region, are only going to blend where it is the lowest cost to do so, he added, “so it is up to the downstream blender to maximize and create the advantage of blending biodiesel into heating oil.”

“Maverick marketers,” as Cooper called them, are already in some places taking advantage of the swaying price of biodiesel and their ability to blend more or less into their heating oil, depending on the time of the year. As Cooper pointed out, there are obvious times of the year when biodiesel supply is greater than demand and vice versa, and a blender who can recognize that can create a greater profit, blending more biodiesel into a heating oil product depending on the price. But, there are also blenders that are simply blending more biodiesel into their heating oil products to differentiate themselves from other blenders.

“They want to show how to be profitable and that their company can grow by offering a different or better product,” Cooper said. “Many of our customers (blenders) do blend higher blends, and it is not for disrespect to the equipment companies, but it is really about the economic paradigm that they are in. They need to make a little more money, their homeowners want a higher blend and, in addition to that, state incentives have incentivized us to use up to a B20 blend today.”

And because, as Cooper inferred, biodiesel-blended heating oil is heating oil, a blender doesn’t have to worry in most cases about blending higher ratios of biodiesel into the fuel. For blenders that recognize this situation, they can install the necessary blending equipment and controls to effectively blend different ratios depending on the market parameters at a given time he said.

“How are we going to grow?” he asked. “We are going to grow because we have opportunities to blend biodiesel in heating oil.”

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