Biofuel Demand Fell in 2011,Outlook Bright – Czarnikow
by David Brough (Reuters) Global biofuel demand fell in 2011 due to the impact of government requirements and greater incentives in food markets, but usage is set to grow driven by new technologies, commodities house Czarnikow said on Friday.
“This comes despite a rise in crude oil prices that should make renewable alternatives competitive: So why the fall?
“The reasons are both economic and rational. Demand is led by a mix of mandates and market incentives.”
Flexible market factors, notably sharp increases in food prices, had been a key driver of the falling bio-ethanol demand.
“As food prices outpace energy prices, cane has been re-allocated to food production – a trend seen in Brazil since 2009,” Czarnikow said.
…”Despite the fall in bio-ethanol usage in 2011, the potential for bio fuels continues to grow as price trends and policy combine to encourage growth in the market,” Henry Toller, analyst at Czarnikow, said.
U.S. renewable energy policy is also encouraging second-generation bio fuels derived from non-food sources.
New technologies such as the emergence of cellulosic ethanol, using non-edible plant material, will contribute to growth in usage of the biofuel, Czarnikow said.
…”Over the long term, higher crude prices make bio fuels more viable. Short term, the reverse has happened, as rising crude has reduced overall fuel consumption in the U.S., and hence consumption of ethanol via the country’s mandated fuel mix (“E10″, or 10 percent ethanol),” it said.
“That mandated mix means there is no additional scope for growth.”
Changing the blend ratio for U.S. fuel could change this, Czarnikow said.
“But changing the mix may also impact on vehicle warranties. Not to mention the complication of having to add new pumps at petrol stations.” READ MORE