Bad weather, crop failures, regulatory confusion, economy fears put the price squeeze on biofuels

June 29, 2012 |

Any way you look at it, this hasn’t been a good year for biofuel feedstocks. In the US rising crop costs have squeezed both farmers’ and producers’ margins, while in Brazil high sugar prices have made ethanol uncompetitive with subsidized gasoline, Europe is awash in biodiesel amid shrinking production and low demand, and in the US demand for all road fuel is rapidly declining with spot ethanol mainly negative, forcing Valero and some other ethanol producers to idle production.

Is this the end of the biofuels world? Not just yet according to energy columnist Gerard Wynn, but in the short run we may be in for 1996-style output and price stagnation.

The downtrend has been particularly hard on those producers and fuel manufacturers who had prepared to market higher blends of 15 percent ethanol, but the European Union is worst off because its both its Renewable Energy Directive and the EU Fuel Quality Directive were based on blending with the readily available biofuels of their time. In addition, says Wynn, the market has been paralyzed by uncertainty over how regulators will account for the carbon emissions of alternative fuels, as well as by cheap U.S. imports and currently tight vegetable oil and grain markets.

More on the story.

Category: Policy

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