SAF Mandates Rise as Refiners Push Back on RFS – Echoes of 2018?

As the spotlight remains fixed on Sustainable Aviation Fuel (SAF) mandates globally, SAF continues to command a striking premium. HEFA-SPK in Europe is quoted at $1,765–1,778/mt fob ARA, while conventional Jet A1 hovers near $680/mt—representing a staggering +$1,085/mt premium. With economics like these, it’s no surprise that mandates are the backbone of SAF adoption. Under the ReFuelEU Aviation regulation, all aviation fuel supplied at EU airports must include at least 2% SAF now, and this figure is set to rise to 6% by 2030. There is a coprocessing component here, especially in the EU, that makes achieving this mandate a lot easier than it appears, which should continue to put pressure on SAF pricing.

Yet, amid this regulatory momentum, RIN markets were roiled on Thursday by a rumor suggesting the White House might approve 163 outstanding Small Refinery Exemptions (SREs)—hearkening back to the opaque approvals granted in 2018 under Scott Pruitt. That year, the EPA silently approved dozens of SRE petitions without notifying the market. The move wasn’t disclosed until after RIN prices had already collapsed, with refiners benefiting from reduced compliance obligations while traders and obligated parties were left in the dark.

The EPA has now denied this week’s rumor, labeling it market manipulation, but the damage was done: D4 RINs fell to 1.074 at the close. Whether or not the report proves true, the precedent set in 2018 means the market cannot afford to dismiss such speculation outright. Where there is smoke, there may indeed be fire.

While refiners are lobbying fiercely against high RVO burdens, biodiesel producers are struggling with economics that remain deeply negative. Screen margins are around -50 c/gal with ICE gasoil below $605/t, and feedstocks like UCO are increasingly diverted toward SAF due to stronger returns. This shift further squeezes the biodiesel supply chain, tightening availability and intensifying the competition for waste oils.

Meanwhile, U.S. agriculture faces headwinds from unresolved trade tensions. If the tariff dispute with China escalates, farm export opportunities could suffer. And as of today, tensions have also flared between the U.S. and the EU, with the White House now reportedly threatening to impose higher tariffs on European imports. Such developments could strengthen political support for boosting domestic biofuel demand—raising RIN prices and intensifying refiner compliance pressure. The parallels to 2018 grow sharper by the day: backroom deals, rising liabilities, and a market driven more by politics than fundamentals.

Adding further uncertainty, the European Union’s Union Database (UDB), meant to verify and track biofuel transactions under RED III, continues to face delays. Despite a May 21 compliance deadline, most member states have yet to transpose RED III into national law. Certification bodies can no longer issue Proofs of Sustainability for any fuel not registered in the UDB, yet enforcement remains patchy. The situation has cast doubt over near-term compliance clarity and underscores the fragility of oversight in the face of mounting sustainability demands.

Finally, one cannot ignore that refining margins themselves remain robust. The heat crack spread currently sits near $27.20/bbl—among the highest levels seen in the last 18 months. With diesel and heating oil yields driving strong profitability, any additional compliance burden like RIN purchases or SAF blending mandates is viewed by refiners not just as regulatory friction, but as a direct cut to already healthy margins. In that environment, opposition to the RFS is only natural—and highly coordinated.