Backlash against biofuels could drive up energy costs

Biofuels use has surged among countries seeking ways to reduce costly petroleum imports. But the redirection of food into vehicle tanks instead of grocery stores has triggered a push-back, particularly against U.S. corn-based ethanol.

Some U.S. politicians, including Sen. John McCain, the Republican presidential candidate, are calling on environmental regulators to scale back renewable fuels legislation. An adviser to the U.N. Secretary-General this month urged the United States and Europe to cut biofuels use to take pressure off the soaring cost of food.

“In a limited way, the use of biofuels can help slow the acceleration of gasoline prices. So if you did have a backlash that results in the biofuels mandates being reversed, that would result in more use of petroleum-derived fuels and, theoretically, in higher (energy) prices,” said Eric Wittenauer, an energy analyst at A.G. Edwards in St. Louis.

Indeed, biofuels have made inroads into the global energy system. The U.S. Energy Information Administration expects biofuels to make up 2.3 percent of global petroleum use by 2015 and 3.5 percent in 2030, up from around 1 percent now.

The United States last year passed a law requiring the country’s gasoline supply to include 36 billion gallons of renewable fuels by 2022. At current consumption rates, this would result in ethanol comprising 25 percent of gasoline demand. Ethanol supply from corn would be capped at 15 billion gallons, about double the current capacity.

EU leaders, meanwhile, pledged last year to increase the proportion of biofuels used in petrol- and diesel-consuming land transport to 10 percent by 2020.

Removing biofuels from the mix “certainly wouldn’t help oil prices. Because there’s such low spare capacity and concerns over supply disruptions, there would be an impact on the price of oil,” said Linda Doman, EIA analyst.

1|2|Next Page>>

SharePrintEmail

Write a Comment

Terms

Enter your comments - 3000 characters max

Type in image code

Submit

 Receive China Post promos
 Respond to this email