[Sustainable-biodiesel] "biodiesel in the dumps"

[Erik Hoffner]

Here's an opinion piece on the US biodiesel industry
at Grist of interest linked below. A couple of the
comments attached to the post are noteworthy including
Sam Wells' and Ron Steeblik's on the US-Europe
biodiesel market - a view from the other side of the
pond:

http://gristmill.grist.org/story/2008/3/21/81937/3097

The U.S.-Europe biodiesel nexus

Thanks for the continued coverage on this issue, Tom.
The Atlanta Constitution does not get it exactly
right, however, when they say that "cheaper soy and
palm oil from Asia, Africa, and Latin America
increasingly replace domestically grown soy oil."

Soy and palm oil may be less expensive to produce in
Asia, Africa, and Latin America than in the United
States, but all producers are selling into a global
market, at global-market prices. If foreign-produced
vegetable oil is cheaper, it is only marginally
cheaper. That means that it may be more profitable for
investors to establish farms producing soybeans
outside the USA, but it does not mean that imported
vegetable oils are likely to prove to be a huge
bargain for biodiesel producers.

Here are some figures from the FAO: two years ago palm
oil was selling for $450 per ton, versus $540 per ton
for soya oil (both prices north-west Europe). Today
the two are selling for, respectively, around $1160
and $1400 per ton. That makes palm-oil methyl ester
(POME) look cheaper on paper, but palm-oil makes a
biodiesel that is inferior (because it tends to become
more viscous at cold temperatures) to soy-oil methyl
ester.

Rapeseed (i.e., canola) oil -- the main feedstock for
European producers, and the highest-grade oil for
cooking -- was selling at $720/ton two years ago;
today the price is almost exactly double: $1434. In
short: the relative price gaps of palm oil and soya
oil have narrowed considerably vis-a-vis that of
rapeseed oil, and soya oil is now selling at almost
the same price as rapeseed oil.

I don't know where the Atlanta Constitution gets the
idea that it is an "environmentally conscious Europe"
that takes most of the U.S.-produced fuel. Demand for
biodiesel here in Europe is as artificial as it is in
the USA, increasingly driven by government blending
requirements and generous tax exemptions. It is the
combination of blenders' tax credits in the USA, and
the much higher price for biodiesel in Europe (because
petroleum diesel is taxed at rates that are so much
higher than those applied in the United States), as
well as the weakening of the U.S. dollar against the
euro, that is driving this crazy and costly trade.

Finally, don't forget that the $1.00 per gallon
federal excise tax credit for biodiesel is only one of
several forms of support given to U.S. producers. Most
producers using virgin oils or tallow as feedstock
also benefit from the $0.10 per gallon Small
Agri-Biodiesel Producer Credit, as well as state-level
subsidies (an additional $1.00 per gallon in Kentucky,
for example), and various ad-hoc investment incentives
provided by local and state governments. It all totals
up, according to Doug Koplow ("Biofuels -- At What
Cost? 2007 Update on the United States"), to between
$2.10 and $2.60 per gallon.

by Ron Steenblik at 4:12 AM on 22 Mar 2008 



 


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