Battered by Virus and Oil Slump, Biofuels Fall Out of Favour

by Benoît Pelegrin (Agence France-Presse/Barrons) Hit by the coronavirus pandemic and a sharp drop in oil prices, biofuel demand has declined for the first time in two decades and may struggle to recover, according to experts.

"The collapse of oil prices has had a very negative impact on biofuels," rendering them uncompetitive, Olivier Lemesle, director of studies at Xerfi, told AFP.

The production of biofuels for transport in 2020 is expected to decline 11.6 percent on 2019 levels, the first fall in 20 years, according to the International Energy Agency's (IEA) annual report, published in early November.

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While the cost of the equivalent of a barrel of biodiesel has remained at around $70 throughout the pandemic, the price of crude oil plunged at the beginning of the year when drastic coronavirus lockdown measures cut demand.

The price of a Brent oil barrel has since recovered but has remained below $50 since March 6, when it fell below the threshold for the first time since 2018.

Environmental solution
The plant-based substitutes for petrol and diesel still hold some advantages, particularly in terms of the environment, as they emit 50 percent fewer greenhouse gas emissions than their fossil fuel equivalents.

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However, in addition to the damaging oil prices, the industry is still reliant on politicians and whether they decide to raise the proportion of biofuel that can be mixed with conventional fuels and sold at the pump.

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Sustainable biofuels "constitute a strategic lever for the short and medium-term reduction of net emissions from the aviation sector, which has few energy alternatives," according to the French Ministry of Ecology.

But France's ambitions, despite being the world's fourth-largest biofuel producer, remain modest, with an aim to substitute 2.0 percent of aviation fossil fuel kerosene by 2025 and 5.0 percent by 2030.

Biofuels represented only 0.01 percent of the fuels consumed by the sector in 2019, despite being identified as a priority by airlines in their long-term objectives. READ MORE

RESTRICTIONS, SPIKE IN CASES COULD SLOW BIOFUEL RECOVERY (Brownfield Ag News)