NEW YORK, May 9 (Reuters) - U.S. refiner Vertex Energy ( VTNR )

said on Thursday it will pause renewable diesel

production at its refinery in Mobile, Alabama, and convert it to

produce fossil fuels instead, citing macroeconomic woes which

might persist through next year.

Renewable diesel can fully substitute traditional diesel,

but it is much more expensive to make and therefore relies on

government blending mandates and subsidies.

Experts say these mandates have failed to keep up with

supply growth, cratering margins for those who bet on biofuels

as a means to survive the transition away from fossil fuels.

Vertex, which only last year converted some units of its

75,000 barrel per day refining complex to produce renewable

diesel, said it will exhaust its feedstock inventory before

pausing renewable diesel output. It will then convert the units

back to fossil fuels output.

The conversion process will likely happen by the end of this

year, according to Tudor Pickering & Holt.

"Due to the significant macroeconomic headwinds over the

past 12 months, many of which we believe will continue to occur

over the next 18 months and potentially beyond, we have decided

to strategically pause our renewable diesel business and pivot

to producing conventional fuels," Vertex CEO Benjamin Cowart

said in a first quarter earnings statement.

The company can still convert these facilities to produce

renewable diesel again "based on market conditions," it said.

Vertex said the unit ran at just around 50% of its 8,000 bpd

capacity in the first quarter and renewable fuel gross margins

fell from $12.11 a barrel in the fourth quarter of 2023 to

$10.29 a barrel in the first quarter this year.