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Biodiesel hedging under binding renewable fuel standard mandates

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  • Franken, Jason R.V.
  • Irwin, Scott H.
  • Garcia, Philip

Abstract

We apply an encompassing framework to assess the viability of hedging spot biodiesel price risk for four U.S. markets with a conventionally used heating oil futures contract and a soybean oil futures contract based on the logic that supply shifts (i.e., price of soybean oil as an input) drive biodiesel prices when binding blending mandates are in place. Results indicate that soybean oil futures should in fact be part of a composite hedge, and that in some instances greater hedging weight should be placed on the soybean oil futures contract than the conventionally used heating oil futures contract.

Suggested Citation

  • Franken, Jason R.V. & Irwin, Scott H. & Garcia, Philip, 2021. "Biodiesel hedging under binding renewable fuel standard mandates," Energy Economics, Elsevier, vol. 96(C).
    • Handle: RePEc:eee:eneeco:v:96:y:2021:i:c:s0140988321000657
    DOI: 10.1016/j.eneco.2021.105160
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    Cited by:

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    2. Jason R. V. Franken & Scott H. Irwin, 2024. "Revisiting biodiesel hedging," Agribusiness, John Wiley & Sons, Ltd., vol. 40(4), pages 1002-1015, October.

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