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Here's How Cleaner Transportation Fuels Are Powering Valero's Growth
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Key Takeaways
VLO's Diamond Green Diesel venture has expanded renewable fuel capacity to about 1.2 billion gallons annually.
Valero's Port Arthur project can convert up to 235 million gallons of renewable diesel into SAF each year.
Valero operates 12 ethanol plants with annual production capacity of 1.7 billion gallons.
As governments and consumers place greater emphasis on reducing emissions and improving air quality, demand for cleaner transportation fuels is expected to grow. To address the growing demand for cleaner fuels and meet low-carbon fuel standards, Valero Energy Corporation (VLO - Free Report) is expanding its low-carbon fuels business through renewable diesel, sustainable aviation fuel (SAF) and ethanol, creating a diversified platform beyond traditional refining.
Valero's low-carbon fuels portfolio is anchored by its Diamond Green Diesel (DGD) joint venture, which has increased renewable fuel production capacity from 160 million gallons per year in 2013 to approximately 1.2 billion gallons per year in first-quarter 2026. Since its inception, DGD has generated more than $3 billion in cumulative EBITDA. Renewable diesel is particularly attractive because it can reduce greenhouse gas emissions by up to 80% while remaining compatible with existing fuel infrastructure.
Valero strengthened its sustainable aviation fuel (SAF) capacity through the Port Arthur project, which can convert up to 235 million gallons of renewable diesel into SAF annually. The project enables airlines to meet strict emission requirements while providing an attractive return that surpasses the company's 25% after-tax internal rate of return threshold.
The refiner operates 12 ethanol plants producing 1.7 billion gallons of ethanol annually, benefiting from low-cost operations, export opportunities and lower-carbon incentives. Together, renewable diesel, SAF and ethanol support long-term cash flow growth and enhance VLO’s ability to capitalize on the growing demand for cleaner transportation fuels.
Are BP & CVX Focused on Reducing Emissions?
BP plc (BP - Free Report) and Chevron Corporation (CVX - Free Report) are actively implementing strategies aimed at minimizing emissions and improving overall air quality.
BP has developed a diversified renewable energy portfolio across solar, wind and bioenergy through strategic partnerships that enhance growth while limiting capital requirements. BP has also strengthened its presence in renewable natural gas through Archaea Energy, positioning it to benefit from rising demand for lower-carbon fuels.
Chevron is actively cutting emissions by scaling up the production of renewable fuels such as biodiesel, hydrogen and renewable natural gas. To further minimize its carbon footprint, CVX is simultaneously advancing carbon capture, utilization and storage technologies to safely trap carbon dioxide underground.
VLO’s Price Performance, Valuation & Estimates
Valero shares have gained 101.6% over the past year compared with the 60.1% improvement of the composite stocks belonging to the industry.
Image Source: Zacks Investment Research
From a valuation standpoint, VLO trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 7.87X. This is above the broader industry average of 5.95X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for VLO’s 2026 earnings has remained unchanged over the past seven days.
View the Zacks #1 Rank List
Image: Shutterstock
Here's How Cleaner Transportation Fuels Are Powering Valero's Growth
Key Takeaways
As governments and consumers place greater emphasis on reducing emissions and improving air quality, demand for cleaner transportation fuels is expected to grow. To address the growing demand for cleaner fuels and meet low-carbon fuel standards, Valero Energy Corporation (VLO - Free Report) is expanding its low-carbon fuels business through renewable diesel, sustainable aviation fuel (SAF) and ethanol, creating a diversified platform beyond traditional refining.
Valero's low-carbon fuels portfolio is anchored by its Diamond Green Diesel (DGD) joint venture, which has increased renewable fuel production capacity from 160 million gallons per year in 2013 to approximately 1.2 billion gallons per year in first-quarter 2026. Since its inception, DGD has generated more than $3 billion in cumulative EBITDA. Renewable diesel is particularly attractive because it can reduce greenhouse gas emissions by up to 80% while remaining compatible with existing fuel infrastructure.
Valero strengthened its sustainable aviation fuel (SAF) capacity through the Port Arthur project, which can convert up to 235 million gallons of renewable diesel into SAF annually. The project enables airlines to meet strict emission requirements while providing an attractive return that surpasses the company's 25% after-tax internal rate of return threshold.
The refiner operates 12 ethanol plants producing 1.7 billion gallons of ethanol annually, benefiting from low-cost operations, export opportunities and lower-carbon incentives. Together, renewable diesel, SAF and ethanol support long-term cash flow growth and enhance VLO’s ability to capitalize on the growing demand for cleaner transportation fuels.
Are BP & CVX Focused on Reducing Emissions?
BP plc (BP - Free Report) and Chevron Corporation (CVX - Free Report) are actively implementing strategies aimed at minimizing emissions and improving overall air quality.
BP has developed a diversified renewable energy portfolio across solar, wind and bioenergy through strategic partnerships that enhance growth while limiting capital requirements. BP has also strengthened its presence in renewable natural gas through Archaea Energy, positioning it to benefit from rising demand for lower-carbon fuels.
Chevron is actively cutting emissions by scaling up the production of renewable fuels such as biodiesel, hydrogen and renewable natural gas. To further minimize its carbon footprint, CVX is simultaneously advancing carbon capture, utilization and storage technologies to safely trap carbon dioxide underground.
VLO’s Price Performance, Valuation & Estimates
Valero shares have gained 101.6% over the past year compared with the 60.1% improvement of the composite stocks belonging to the industry.
From a valuation standpoint, VLO trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 7.87X. This is above the broader industry average of 5.95X.
The Zacks Consensus Estimate for VLO’s 2026 earnings has remained unchanged over the past seven days.
Image Source: Zacks Investment Research
Valero currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.