Why do rebates for used cooking oil change?

Why do rebates change is a question restaurateurs have long asked. Rebates are typically based on the value and volume of the used cooking oil collected from a restaurant. We all understand changes in volume but why does the price of used cooking oil change?

Used Cooking Oil prices are affected by competing commodities

First, used cooking oil is a commodity and prices of commodities change with changes in the marketplace. Used cooking oil competes with soybean oil, palm oil, corn oil and other feedstocks. When their prices change, it affects the price of used cooking oil. If the price of used cooking oil declines by 50% then what the collector receives declines by 50%. And if the collector’s revenues decline by 50% he may not be able to pay the same rebate he was paying when he received full price for his oil.

Used cooking oil prices are affected by EPA regulations

In addition to changing prices for commodities, government policies play a very large role in the price of biodiesel which, in turn, affects the price of UCO. The RFS program, administered by the EPA, uses a RIN as its currency. A RIN is a renewable identification number, a credit, used to measure compliance by biofuel producers. Biofuel producers have to blend in so much biofuel into their products to meet RVOs (renewable fuel obligations) set by the EPA. Each gallon of biofuel produced is assigned a RIN. RINS create flexibility as they can be bought by producers needing more credits to meet their obligations. They are bought and sold in the marketplace between producers and have a real dollar value. In 2024 there has been an oversupply of biodiesel fuel which has forced a decline in RIN prices from Jan 23 to Jan 24 of 72%. A sharp decline in the price of a RIN has contributed to lower prices for used cooking oil.

A flood of “Chinese used cooking oil” has driven prices down

This rather complex interplay of RINs and regulations has driven the price per gallon of UCO down significantly in 2024. That coupled with a 3X rise in imports of “used Chinese frying oil” has hurt legitimate UCO collectors and the prices they receive. Many believe the Chinese frying oil is not used frying oil at all but slightly doctored palm oil being passed off as used cooking oil to fraudulently claim EPA credits as a renewable fuel. If this Chinese frying oil is really palm oil, it is a bane for environmentalists because palm oil is a major source of deforestation in Indonesia. And to have palm oil receive credit as a biofuel is a travesty and corruption of the entire biodiesel system set up by the EPA.

The effect on used cooking oil rebates

These factors put a lot of pressure on the price of used cooking oil, affecting what a collector receives, which may in turn impact the rebates that restaurateurs receive.