The speculative money pumped into biodiesel production start-ups is about to reach it’s expected outcome: a very oversupplied domestic market. In fact, this market condition already exists, with much domestic biodiesel production heading to Europe in late 06.
One industry insider, who prefers to remain anonymous, predicts…
“Total U.S. biodiesel capacity will be at less than 50% utilization in 2007, which will effect planned delays in several new plant construction projects as well as some complete plant shutdowns; marketers and retailers will benefit from good pricing.”
Some 80% of on-road diesel is sold at public fueling locations. So will Big Oil help make biodiesel available? American Petroleum Institute President Red Cavaney, in an exclusive interview with EnergyWashington senior editor Peter Rohde, says…
“You have got to remember, when you get down to retail only 5 percent of the retail stations are owned by the oil companies or the refiners. The rest of them are owned by individual businessmen or women. Some of them are jobbers, but a lot of them are just independents. Those are the ones that make those decisions. So they have got to see in their community enough demand to make them feel comfortable, and the government is going to give them credit so they can factor that in and all, and I am sure to a degree that will help a lot of people in their decision, but at the end of the day it is individual business men and women that are going to make these decisions. So the oil company is not going to decide this.”
So all the biodiesel demand side pull will come from mandated RFS laws? Or will a true, ground up market develop? Of course, this could all change if crude reaches $85/bbl and stays there. But this doesn’t seem likely in the near term, given the market’s new-found ability to withstand the same events that shocked crude up $5 a day back in ‘05 (like Nigerian oil worker kidnappings or threats of war against Iran).
We expect biodiesel wholesale prices to squeeze in 2007 and beyond. The producers with control over feedstocks will be in the best position to ride out the storm (Cargill, West-Central, etc).
What does this mean for biodiesel users? Frankly, don’t expect Big Oil to offer biodiesel at the pump anytime soon. They have nothing but upside should biodiesel producers fail. Like any true market, the answer will come from businesses serving a demand that really exists. Propel will continue to target biodiesel outlets at business and communities that are willing to pay for the benefits of biodiesel. In fact, they just may end up paying less in the end.
5 responses so far ↓
Tomas S // January 3, 2007 at 9:56 am
This is all very interesting, as predictions always tickles my mind.
I made a quick search on the internet regarding the availability of biodiesel from the major fuel suppliers here in Sweden. All information comes from the sellers websites and might differ from actual conditions due to inactual websites.
OKQ8, 12 out of 779 stations has B100
Statoil, 7 out of 700 stations has B100
Shell, 381 out of 482 stations has a B5-blend
Norsk Hydro, 395 out of 506 stations has a B5-blend
JET, no information on website
Bilisten, no information on website
Bilia, no information on website
The B100-fuels supplied on OKQ8 and Statoil is as stated on the sites made of 100% RME (Rapeseed Methyl Esther). The B5-blends are ordinary diesel mixed with 5% RME.
Biodiesel (B100) prices currently in Sweden are about 10.55 SEK/litre (ca 5.82$/gallon), just slightly higher than regular 100% diesel.
As seen the availability of B100 is not too good at present state but I hope this is a changing trend.
By the way did you see this on wired?
http://blog.wired.com/cars/2007/01/texas_stays_bio.html
Keep the god work up!
Tomas, Sweden
PDXBiodiesel // January 3, 2007 at 1:42 pm
If you are in the Portland, Oregon, USA area and you would like to find retail biodiesel pumps, I have put up a map of their locations:
http://www.pdxbiodiesel.org
propel // January 4, 2007 at 1:51 am
Thanks for the comment Tomas. Interesting info. I’m very interested in the B100 user profile in Sweden… how are OEM handling it from a warranty standpoint? Who are the users?
Tomas S // January 4, 2007 at 4:08 am
Unfortunately I don’t have the answers yet but these are very interesting questions that I’d like to have an answer on, too. Will try to contact the fuel suppliers to ask what the target group is for B100-fuel and also to contact the major auto-makers (will propably contact the top 10 sold car manufacturers) and hear about the warranty issue. Alls this when time permits, propably in the next few days.
Just found an article stating that during december, 2006, 27,6% of all autos sold in Sweden were diesel-powered. That’s a pretty good number and the market for biodiesel products shurely already is here.
Benji // February 5, 2007 at 1:12 pm
I’m doing research on biofuels for a memo I’m writing, and I think you may be right about the effects of the surplus. I’m from Arkansas, and our state is currently pumping a lot of money into biodiesel start-ups. The state legislature is getting all hyped up about it, and is considering pushing some pretty strong tax incentives at the state level — that’s unusual behavior for AR reps, who usually stay in the background and let the governor handle things. Anyway, I think it’s an interesting little microcosm…read if you’re interested.
http://www.nwaonline.net/articles/2007/01/26/topics/assembly07/012707lrlegbiodiesel.txt
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