Biodiesel vs Petroleum Diesel

Once a while, I draw particular attention to biofuels in particular to biodiesel. This was my research interest in Cambridge.

Price tracking of biodiesel and petroleum diesel from 2006 - 2008

Biodiesel has regularly been priced out by cheaper petroleum diesel. International prices for vegetable oil prices have been more expensive than those for diesel for all of the past 15 years, hence producers would earn more by selling the vegetable oil on the international market than by converting it to biofuel.

Some governments have mandated the conversion of vegetable oil to biodiesel, However, under such circumstance it would force its use for a lower value end-use, which is bad for the economy.

When I started the research, prices of crude oil were fluctuating between $60 and $80 per barrel. By the time I completed the research, the price of oil shot up to the $100-mark. This goes without saying that future prices of oil are difficult to predict. Unfortunately, the prices of biofuels rise and fall in tandem with the prices of crude oil.

10-year price-tracking of crude oil

The petroleum and agricultural commodity markets have been highly volatile in recent years. The OECD-FAO Agricultural Outlook suggests that a persistent rise in demand for vegetable oils will result in a long-term price trend of these products averaging about 60 per cent higher prices in the 2008–17 period than the average levels in previous years.

This means, if for example, crude palm oil (CPO) prices fell to the levels in 2006 when I started my research, palm biodiesel would still require government support to be economically viable. Otherwise, fossil fuel subsidies, such as those enjoyed by a majority of southeast Asian nations, must come down. In other words, petroleum and biofuel producers must compete on a level playing field if the governments want a meaningful growth in biofuel consumption.