Biofuels in 2009

Biofuels in 2009

It seems strange to imagine now that, just one year or so ago, biofuels were held responsible for rapidly-rising prices of food commodities such as corn, sugar, wheat and vegetable oils. Riots were seen in more than 30 countries over these cost increases and along with such portentous events many environmental groups, the World Bank, international governments and the UN all served warnings regarding apparent public support for the ever-burgeoning biofuel industry. As the world slipped suddenly into the grip of the credit crunch and the global recession took hold we saw the biofuel industry implode, thereby quieting the clamor surrounding its influence. In the short-term around the beginning of 2008 commodity prices tumbled and global demand evaporated, causing many of the major players in the industry to file for bankruptcy. Indeed, production at some plants only resumed at the beginning of 2009 as serial prices fell from record highs.

European biofuel companies do have the advantage of being situated in a regulated market and so have had some protection from the ravages of 2008-9. Many in the industry from the stand-point of late 2009 see positive growth in the coming years. Some predict that within the next decade the ethanol market will quintuple in Europe, quadruple in Brazil and triple in the US. Indeed, to underscore the current growth from recessional ravages Europe’s largest ethanol producer is currently constructing continental Europe’s largest ethanol plant in Holland. This is certainly a positive sign for progress and development as we stand on the cusp of the new decade.

As a further positive indicator by the end of 2009 the European union had set a target of meeting 10% of its transportation requirements with renewable energy sources, including biofuels. As the drive towards clean energy and future investment strengthens this number will surely increase.

Analysts and production companies have asserted that such large-scale government policies are expected to continue, which will only serve to underpin the expansion of the biofuels industry. They do, however, suspect that commodity prices will stay low throughout much of the coming year, unless we see demand recover along with a symmetrical economic recovery from recession. If this happens, analyst have speculated that there could potentially be a repeat of previous spikes in global food prices.

It is also thought that rising biofuel use along with a surge in human and animal food consumption will put a continued strain on global food supplies in the coming year, principally because cereal production in 2009 has not kept up with demand. Analyst predict that if more money is not diverted to agriculture we could just be one bad crop away from a price spike, perhaps within the next year.

Biofuels currently account for just over 2% of total global fuel supplies and for about half of all growth in fuel production outside OPEC countries. It is thought that renewable fuel production will triple by 2020 to meet blending targets, and by 2050 26% of the worlds’ transportation fuel will be renewable based upon trends seen throughout the past year.

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