Australia Exports Tallow for US Fuel and Imports 90% of Its Diesel

The fat trimmed off Australian cattle has a more interesting afterlife than most people realise. Rendered down into tallow, much of it is loaded onto ships bound for the United States, where most of it ends up in renewable fuel. Meanwhile, according to the ABC, Australia imports about 90 per cent of the diesel it burns.

That odd mismatch got a fresh airing on the ABC's Landline programme this month. And it lands right in the middle of a question Canberra is now trying to answer: should Australia be turning more of what it grows and rears into its own fuel?

The fat that leaves the country

Here's what's really going on. Australia is the world's biggest exporter of tallow and animal oils, and exports hit a record $1.5 billion last year. Around 80 per cent went to the US. Jess Bloomfield of the Australian Renderers Association told the ABC the US has "a really strong renewable fuels policy". What it lacks is enough fat and oil of its own to feed it.

Supply hasn't been the problem. Renderers turned out more than a million tonnes of product last financial year, mostly from beef, on the back of the biggest cattle slaughter Australia has seen since 1978. The value of tallow rose 26 per cent.

That's quite a promotion for something once best known for candles and soap. It still turns up in pastries and meat pies, too. At Parwan, north west of Melbourne, a rendering plant that cost about $40 million opened in 2023, and its owners plan to double or even triple production within a few years. The raw material is exactly what you'd guess: stomachs, heads, hooves, fat and bone.

GrainCorp's Jeff Summerville put the new interest bluntly: "What's happened in the Strait of Hormuz is fuel security has become really important."

Why diesel is the weak spot

Let's put this in perspective. The ACCC's latest weekly monitoring report put average diesel across the five largest cities at 275.8 cents a litre on 4 November. That's 99.2 cents higher than on 20 February, around a week before the conflict with Iran escalated. Petrol, at 232.7 cents, is up 61.8 cents over the same stretch. Out in the regions, diesel averaged 282.5 cents.

Stocks tell a similar story. The federal government's weekly fuel update showed 31 days of diesel cover in the week to 3 November, three days fewer than a week earlier, against 41 days for petrol. Suppliers are also still allowed to hold up to 20 per cent less petrol and diesel than the usual legal minimum, under a temporary easing of the stockholding rules first made in March and since extended into early 2027.

Then there's the part that frustrates local producers. In October the ABC reported that more than 60 megalitres of Australian made biofuel went overseas in the first half of the year, including 24 million litres of ethanol. "At a time of a fuel crisis, we ignored fuel that we made here and instead sent it to other countries," said Matt Hobbs of the Biofuel Producers Alliance. Biodiesel supplied just 0.1 per cent of the country's diesel last year.

What Lytton is actually planning

The real story is at Ampol's refinery in Lytton, on Brisbane's eastern edge and one of only two refineries left in Australia. In April the Queensland Government committed $25 million to a renewable diesel project there and declared it a prescribed project, which speeds up the approvals process.

Stage one is modest. Ampol plans to modify its existing diesel hydrotreater so it can process plant oils and animal fats alongside conventional diesel, making up to 20 million litres of renewable diesel a year. Construction is meant to start by mid 2027, with production in 2028. A much larger plant, developed with IFM Investors and fed by canola, used cooking oil and tallow supplied through GrainCorp, could make up to 750 million litres a year of renewable diesel and sustainable aviation fuel by the early 2030s. No final investment decision has been made.

Worth keeping the numbers honest. Australia uses more than 30 billion litres of diesel a year. Stage one would cover well under a tenth of one per cent of that. The full plant would get to roughly 2.5 per cent. Useful, but not a fix on its own.

What most people don't realise is that renewable diesel and biodiesel are different fuels. Biodiesel is chemically distinct from mineral diesel, so regular diesel in Australia can contain only up to 5 per cent of it, and stronger blends such as B20 are sold under their own standard. Renewable diesel is made by treating fats and oils with hydrogen, which produces something almost identical to fossil diesel. It can generally go into existing tanks, pipelines and engines without changes. That's why refiners like it.

The fight over who pays

Canberra has two levers. The supply side is the $1.1 billion, ten year Cleaner Fuels Program, unveiled at Lytton in September 2025, which pays incentives for local production. The demand side is still being argued over. A consultation paper released on 18 August floated a volumetric mandate, which the ABC reported would start in 2029, shifting to a carbon intensity standard after 2035. In plain language, fuel suppliers would first have to sell a set volume of low carbon fuel, and later cut the average emissions of everything they sell.

Not everyone is sold. The Biofuel Producers Alliance wants blending to start from 2027. The Australian Chamber of Commerce and Industry warned that demand obligations "should only proceed where it is proven that sufficient fuel is available at a competitive price".

Compared to other countries, Australia is a late starter. More than 60 nations have biofuel purchase mandates, including the US, the UK, Canada, much of the EU and Singapore. Here, only NSW and Queensland have ever set state mandates, and they're small.

What it means at the bowser

The practical upshot for your wallet is that nothing changes this summer. The first renewable litres out of Lytton aren't due before 2028.

Further out, two forces pull in opposite directions. Renewable diesel generally costs more to make than the fossil kind, which is why the US and Europe use mandates and credits to get it sold. A mandate spreads that extra cost across every litre, so its design will matter a great deal for what you pay. On the other side, every litre made here from Australian fat and canola is a litre that doesn't have to sail past Iran. This year has shown what that's worth: diesel up 99 cents a litre in under nine months.

Petrol drivers already have a homegrown biofuel at the bowser in E10. Some servos ran out of it in March and April, even as ethanol was being shipped overseas. If your car is compatible, E10 prices usually sit a few cents below regular unleaded.

Takeaways

Australian cattle fat already ends up in American fuel tanks. Whether it does the same job here depends on decisions Canberra hasn't made yet, so keep an eye on this space.