A drop in oil prices combined with tougher credit terms have forced a Merseyside-based used food oil recycler into administration. Refuel Energy, which produces biodiesel from used chip fat, suffered reduced profit margins when the cost of its vegetable oil feedstock increased.
While costs increased, the price consumers were paying for end-product fuel oil reduced as prices dropped around the world. This squeezed profit margins.
In normal trading conditions waste oil biodiesel would have been a good business prospect. But more competitive market conditions, meant lenders were less willing to offer generous credit lines. Refuel Energy was able to get credit, but the directors found the terms and conditions unacceptable, which brought an end to trading.
But, administrators Parkin & Booth said they had agreed a pre-pack deal with the director Victor Kaminiski, which could enable him to set up a new smaller version of the business on the old site.
A Parkin & Booth spokesman said: Assets such as the large storage tanks at the companys site could not be moved if sold. So, the only deal that could be done was to sell them to a someone that could trade from the premises.
An expert in oil recycling commented that another reason the company had collapsed was its dependence and therefore over sensitivity to volatile oil prices. He said: The slump in oil prices from $147 a barrel last year to $48/50 now has lessened the cost differential on [recycled] fuel. Previously, high oil prices were an incentive to use recycled oil biodiesel. But with reducing world oil prices, the incentive, and therefore the recycled market, has shrunk. He suggested the future for recycled oil companies would lie in diversifying products to include electricity generation as well as biodiesel.