Alternative Views on Biodiesel

A news.google search under the heading “biodiesel” likely would leave most people with the unmistakable impression that biodiesel faces an unusually rosy future.

Last year, for example, Congress created what amounts to a $1-a-gallon subsidy, actually a tax credit, to promote biodiesel use.

In another boost for biodiesel, EPA has implemented stricter sulfur requirements for conventional diesel. Ultra-low-sulfur fuel, which will be available next year, needs an additive to maintain its lubricity --- a role for which biodiesel is well-suited.

In perhaps the most welcome surprise of all, the American Trucking Association, once a vocal opponent of biodiesel, unanimously endorsed an energy resolution recently that includes promoting low blends of biodiesel as part of the organization’s efforts to help shape a strong national energy plan

Meanwhile, Sen. Barack Obama (Dem.-Ill.) has proposed legislation that would require 2 billion gallons of diesel alternatives by 2015 to reduce U.S. dependence on foreign oil.

With a future that bright, who’s worried about biodiesel? As it turns out, a few observers are. It’s not that they’re concerned interest in biodiesel will fizzle out. Rather their concern is that widespread interest in the fuel, particularly among hard-pressed farmers looking for alternative sources of income, could create a biodiesel glut.

The Des Moine Register’s Philip Brasher reports that at least 100 biodiesel plants either are in operation or in various stages of planning throughout the country --- facilities that are projected to supply more than 800 million gallons of biodiesel a year. Whether consumer demand will grow fast enough to absorb this supply remains an open question, according to some observers.

Other factors also need to be considered, according to some observers. Brasher, for example, points out that “a penny-per-pound increase in vegetable oil and animal fats increases the price of biodiesel by 7.5 cents a gallon” --- a factor that has prompted some business consultants to warn against excessive optimism.

Many investors, on the other hand, aren't buying this pessimism.

Indeed, some plants already are being located near readily available sources of biodiesel-related materials. One Missouri-based plant, for example, will use turkey parts to make biodiesel, while a North Dakota facility will use canola oil.

Posted by Jim Langcuster at November 8, 2005 05:09 PM | TrackBack