Alternative Fuels Update

Source: Opec 10/15/2007, Location: Europe

China’s diesel consumption consists of 37% of total products used; therefore the country is trying to meet its increasing demand for diesel via boosting its biodiesel production to catch up with its ethanol production. This product is surviving only on governmental funding; it is affecting not only food prices but the environment as well. China has a long-term plan to boost biofuel production to meet a minimum of 15% of its transport fuel by 2020; however, this goal will not only be costly but also will be at the expense of the environment. Furthermore, China is pushing its coal-to-liquid (CTL) projects via excessive funding in the next few years. CTL Phase One has a capacity of 22,000 b/d and is expected to be commissioned in early 2008.

Palm oil prices have increased 80% since 2005, putting high pressure on biodiesel plants in Asia. New Malaysian biodiesel plants, which are estimated to be commissioned late this year, are expected to be delayed due to high raw material prices. According to some specialists, these kinds of ventures can operate only if oil prices exceed $80/b; otherwise they would not be economically feasible.

Despite the recent OECD study which concluded that promoting biofuel via heavy subsidies is not beneficial to its countries after all, the US is pursuing a five-year plan to develop cellulosic fuels via an extensive subsidy. However, this subsidy will be at the expense of existing biofuel subsidies.


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