Sep 6 2006
Despite all the hype about biodiesel as an alternative fuel source, biodiesel is not the death knell for the largely petroleum-based diesel fuels industry. In fact, the biodiesel movement may serve more to simply balance the competitive landscape than to tip the scales in favor of biofuels, and a newly proposed study by Kline & Company is set to determine exactly what impact biodiesels will have on the world stage.
According to preliminary research for Kline's study, GLOBAL BUSINESS OPPORTUNITIES IN BIODIESEL FUELS, 2006-2016, the supply of raw materials required for biodiesel to replace petroleum-based diesel is simply not available, even on a worldwide scale.
"Even if all of the corn and soy being grown in the U.S. right now were used to make biodiesel in its 100% vegetable oil form, it would only satisfy about 15% of the current demand for diesel fuel," says Geeta Agashe, director of the Petroleum and Energy practice for Kline's research division. "And if we were to use all that corn and soy for fuel, that takes away from our supply for food, as well as the many other non-food products that rely on corn and soy as a base component."
Still, Agashe notes that while biodiesel might never become dominant, it is certainly a trend that the major oil companies should be watching -- and one that potential biodiesel producers could use to their advantage.
"Biodiesel may not be the ultimate solution to the world's fuel problem, but it is an important part of the solution set," Agashe says. "It produces lower emissions when burned and it expands the competitive landscape, giving the consumer a viable alternative to petroleum-based fuel. Having a choice is always better, not only for the consumer, but for the economy as well."
Kline's research indicates that, even as a niche play, biodiesel is still a tremendous opportunity for both raw material suppliers and producers. It provides farmers with a new market for their crops and holds the promise of high profits for food conglomerates and other members in the value chain.
"The most likely scenario is public opinion will drive more legislation aimed at increasing the bio-crude blend for diesel fuels around the world," says Bill Downey, vice president and head of Kline's Petroleum & Energy consulting practice. "For the oil companies, this should be an incentive to invest in biodiesel technology or forge a partnership with a biodiesel producer in order to protect -- and even gain -- market share. They may even consider alliances with Cargill, ADM, or the other world agri-conglomerates for raw material supplies. Either way, they will want to make sure they are well aligned so that if biodiesel becomes 15% or 20% of the total demand, they are in position to take advantage of the opportunity."
http://www.klinegroup.com/