In the era of alternative fuels, grease is turning into a pretty slick investment.
Restaurants increasingly are being paid for their used cooking oil, icky stuff that historically they've had to pay to have hauled away. And sales of kits that allow diesel-powered cars to run on used cooking oil are soaring.
With all the attention, rendering firms are reporting a surge in grease thefts.
Grease's rising star stems from rising energy prices. Demand for biodiesel is soaring, putting pressure on supplies of used vegetable oil, which can be used to make the alternative fuel.
"It all goes back to the high price of crude oil," said Bill Dieterichs, an analyst at The Jacobsen, a publication that follows grease and tallow markets. "That's what started the ball rolling."
The grease business—at least at street level—is not for the squeamish.
"By the time you're done [with it], it's pretty beat-up stuff," said Bob Goldin, a restaurant analyst at Technomic Inc. "It's dark in color. Food particles get in there. It's messy."
In more normal times, grease is treated as garbage, albeit useful garbage. Restaurants pay a rendering company to take it away, much as they would for carting away trash. Renderers refine the stuff into "yellow grease," as its called in the trade. Livestock feed is still by far its biggest end market.
The price of yellow grease originated in Illinois zoomed to 32 cents per pound in April and March, compared with 12 cents per pound during the same period two years ago, according to The Jacobsen.
As the price rose, producers of grease within the last year began sharing their bounty with restaurants. For example, Darling International and Restaurant Technologies Inc., two national grease processors, began a "profit-sharing" program of sorts with higher-volume accounts.
"If you charge them [when prices are low], you have to share the good times with them too," said Randy Stuewe, chief executive of Irving, Texas-based Darling. "If you aren't willing to share, somebody else will."
The grease market is competitive, with relatively low barriers; after all, it can be just a matter of sucking out gunk from a tank into a truck.
So, with prices soaring, "it's sort of a wild west setting for renderers right now," said Jon Getzinger, executive vice president for sales at Eagan, Minn.-based Restaurant Technologies, the biggest U.S. grease recycler for Oak Brook-based McDonald's Corp.
For restaurant companies, grease money isn't a big windfall, but it helps—particularly as their own costs are soaring. "You're not going to get rich on it, but it's definitely a source of revenue," said Sam Toia, owner of Leona's Restaurants, which has 15 outlets in the Chicago area.
Joliet-based Mahoney Environmental hauls Leona's grease, and Toia estimates each of his restaurants collects an average of $100 per month for the stuff—about $18,000 annually for all his outlets combined. Toia said he was getting paid 70 percent more for his grease in April than at the same time a year ago.
The run-up stems partly from the weak U.S. dollar, which has pumped up grease exports, and from other factors. But the biggest reason is the biodiesel boom, Dieterichs said.
"There's a new demand factor, and that is demand from the biodiesel industry," Dieterichs said.
The production of biodiesel, like that of ethanol, has soared as U.S. energy policymakers have focused on lessening demand for petroleum. Last year, the U.S. produced 450 million gallons of pure biodiesel, up from 250 million the year before and 75 million in 2005, according to the National Biodiesel Board.
Biodiesel is an alternative to diesel and when blended with diesel fuel can used to power vehicles such as buses.