High oil propels biofuels into global mainstream, Cheaper Gas Prices?

High oil propels biofuels into global mainstream
Reuters - USA
... Biofuels are plant-based fuels, either ethanol made from sugar or grains, which can be added to gasoline and biodiesel derived from oilseeds or palm oil and ...
See all stories on this topic

PARIS (Reuters) - Record high oil prices have propelled biofuels from niche player to the multi-billion dollar commodity mainstream, causing an explosion in new ventures and investor interest that has fired up global agricultural markets.

From the sugar plantations of Brazil to the rapeseed fields of France, and the U.S. corn belt to Malaysia's palm forests, a search for what's been dubbed the new "green gold" is under way.
Biofuels are plant-based fuels, either ethanol made from sugar or grains, which can be added to gasoline and biodiesel derived from oilseeds or palm oil and added to diesel.

While governments see a way to cut their dependence on imported oil, curb greenhouse gas emissions and boost local agriculture, demand from these new technologies has sparked tensions on traditional food-based commodity markets.

"A victim of its own success, we've seen the first tensions appear on Brazilian and American biofuel markets as prices have risen," the Paris-based Cyclope commodity analysts said.

"The management of these tensions will show whether ethanol has really entered a new golden age and if it can be defined as a 'strategic commodity'," they said in their 2006 report.

So, which regions of the world are best placed to harness biofuel's potential and which crops will ultimately win out?

BRAZILIAN POWERHOUSE

Brazil has long been a biofuel powerhouse, using its vast sugar cane industry to make ethanol. Some industry experts say it could become a "Saudi Arabia" of biofuels.

"Under current technology, the most efficient biofuel is ethanol from sugar cane and so any countries which are natural sugar can producers have an opportunity," Lawrence Eagles, head of oil industry and markets at the Paris-based International Energy Agency (IEA), told Reuters.
The cane-based ethanol industry in Brazil is the world's biggest, with domestic consumption running at around 13 billion liters a year and exports at more than two billion.

Some forecasts have put the growth in exports as high as 10 billion liters within a few years. Brazil's agriculture ministry has put the cane crop at 423 million tonnes this season with just over half going into sugar and the rest into ethanol.

A new ethanol distillery is built every month in Brazil.

The increasing use of bioenergy would benefit mainly the earth's tropical zones as they have the best conditions to grow crops that can be turned into biofuels, said Angelo Bressan, director of the farm ministry's cane and agroenergy department.

"It's necessary to have natural conditions to produce biomass energy and in general these areas are concentrated in parts of Latin America and Africa", he said.

Corn has been the biggest winner in the United States, the world's largest energy consumer. The country has 97 ethanol plants producing the additive and 33 more are being built.

Chicago Board of Trade corn futures recently hit 10-month highs, fueled in part by demand from the ethanol industry. The CBOT has launched electronic trading of ethanol futures.

"Some of the limited net energy gains from producing biofuels from grain has the potential to tighten these markets," the IEA's Lawrence said.

FOCUS ON BIODEISEL IN EUROPE

Europe has concentrated its efforts on biodiesel, mostly made from rapeseed but also sunseed and palm oil. The EU-25 produced 3.2 million tonnes of biodiesel in 2005, up 65 percent on 2004 and making it the biggest biodiesel maker in the world.

The European Commission has set a 5.75 percent inclusion share for all biofuels by 2010 and EU members have the freedom to grant tax incentives to promote biofuels. Some countries, such as France, have announced their own more ambitious targets.

"For the time being, biodiesel is certainly a long-lasting profitable investment in Europe, to the extent the car pool is mainly made up of diesel engines and that the production of oils remains limited," French analyst Agritel said.

Biofuels are also hitting agricultural markets here too. French rapeseed futures have recently hit record highs as the prospect of more demand from the biofuel industry.

But Europe's biofuel push has been patchy. EU officials have recently said their targets for 2010 are unlikely to be met and are now considering making them compulsory.

And Europe does not have unlimited land to devote to biofuels, raising the prospect of cheaper imports.

Asia will increasingly see more palm oil used for biodiesel as key palm growers, such as Malaysia, ready new plants.

Industry officials say more corn will get diverted in China for ethanol, despite efforts by Beijing to curb it and prevent food and feed prices from rising. China will also look at importing more cassava from Thailand for ethanol production.

"For biofuel in Asia, it will be mainly palm oil. For ethanol, it will be crops like cassava and corn in China," said Sunny Verghese, chief executive officer of Olam International Ltd , a Singapore-listed commodities supplier.

In China, the world's third-largest ethanol fuel produce, ethanol plants are being built or expanded at a rapid pace in the top corn-growing province of Jilin.

Analysts say China would also increasingly look at non-grain raw materials -- such as sweet sorghum or cassava, also known as tapioca -- to make ethanol.

And in Thailand, industry officials expect 13 ethanol plants to be running by the end of 2007, compared with just two now.

As a result, Thailand's demand for cassava could surge to three million tonnes next year from one million this year.

Industry officials say Australia's ethanol industry is growing rapidly and could boost the use of wheat, cutting its availability for exports. The Grains Council of Australia estimates that the country's ethanol industry would grow to consume around 1 million tonnes of grain a year as feedstock.

SECOND GENERATION BIOFUELS

But there is a new technology that promises to end the battle between food and biofuel for the world's limited crops.

Scientists are making progress on new ways of extracting ethanol from plant waste -- using the stalks to produce fuel and leaving the food component alone.

Peter Tulej, head of the renewable unit at the IEA, said the production costs for these types of biofuel could be as low as 25 U.S. cents a liter, making them extremely competitive.

"The message is we must invest in these second generation technologies. They stand a chance of becoming competitive in the long-run with petroleum-based fuels," he said.

Cheaper Gas Prices?
Today's THV - Little Rock,AR,USA
They're considered one way to control America's destiny when it comes to gas prices. We're talking about biodiesel and ethanol. ...
See all stories on this topic

They're considered one way to control America's destiny when it comes to gas prices. We're talking about biodiesel and ethanol. They are now being blended here in Arkansas.

These products are made from farm-grown ingredients and then blended with either petroleum or diesel. The purpose is to lessen our country's dependence on foreign oil supplies.

Fuel being blended and pumped in North Little Rock could mean cheaper gas prices in the future. An Illinois-based oil company held a news conference Thursday announcing their capabilities to blend and distribute both bio diesel and ethanol.

Matt Schrimpf with HWRT Oil Co. says, "What we're doing is automating a blend system to allow trucks 24-hour, seven-day-a-week access to pick up biodiesel and ethanol blends."

Experts say the prices, at least for now, are almost comparable to current diesel and gas prices. However, as the petroleum continues to spike and climb, biodiesel and ethanol prices will stay stable because some of the ingredients are homegrown.

Gary McDonald of Eastman Chemical Co. says, "Instead of being made from petroleum, it's made from vegetable oil, cotton seed oil or animal fat, like chicken fat or pork lard."

You can currently buy biodiesel at gas stations in Conway, England and Stuttgart.

JJ&A to publish 2006 biodiesel market study next month
EEMS - Energy Efficient Motorsport - UK
... Jim Jordan & Associates, LLP, a Texas-based biofuels research specialist, will publish a market study of the US and international markets for biodiesel and the ...
See all stories on this topic