High input costs could put the damper on biodiesel growth in 2008, despite the fact that demand for the green fuel will grow. But the long-term outlook still looks pretty positive.
This story from Reuters says that assessment comes from the head of the industry’s largest trade group:
“The economics overall for the biodiesel industry are extremely challenging right now. There’s no question about it there’s been a cooling off what has been some irrational exuberance that has gone on in the investment in biodiesel production capacity over the last two years,” Joe Jobe, CEO of the National Biodiesel Board, told the Reuters Global Agricultural and Biofuels Summit in a telephone interview.
The biggest culprit behind the sliding profit margins has been soaring input costs, Jobe said. The price of soybean oil, the primary feedstock to produce U.S. biodiesel, has reached levels never seen before in history — making it difficult for many plants to make a profit.
Domestic biodiesel margins are running about 10 cents per gallon to a minus 30 cents per gallon, industry analysts said.
The article goes on to point out that biodiesel production in the U.S. went from 25 million gallons a year in 2004 to 450 million gallons in 2007… pretty impressive growth. This year, biodiesel production is expected to hold steady at current levels. But with the passage of the new energy bill, biodiesel production could jump by five times over the next 15 years from what it currently is. Jobe says by 2015, his industry wants to replace 5 percent of the U.S. diesel pool with biodiesel… upping production to 1.85 billion gallons.