The Pros and Cons of Biodiesel Investment

John Davis

A column entitled “Should America invest in bio diesel in a big way?” debates the merits of making investments into biodiesel… and the conclusion seems to be a big positive endorsement of putting greenbacks into the development of green fuel.

Here are some of the highlights posted on

-Benefits of biodiesel-

Biodiesel is a clean and renewable fuel to other energy sources like petroleum, which means using it reduces air pollution and relieves fossil fuels reliance. Jatropha nut has been an increasing favourite raw material over others for biodiesel production because the plant can survive in tough conditions and it is inedible. Thus, it will not compete with other crops for valuable fertile land and the production will not be at the deprivation of food supplies. There are developing new technologies, such as, enzymes usage to speed up the production rate, removing the extreme condition requirements…

According to a United Nations official, biofuels like biodiesel is expected to provide for 25% of the world’s energy needs (Paul, 2007). Although the use of biodiesel locally is still in its infancy, biodiesel is projected to serve ready markets in Asia, Europe and United States. The European Union has mandated that 2% of petrol-based diesel must be mixed with biodiesel (Seng, 2007). There are plans to augment biodiesel blend to 5% in South Korea and to tighten diesel sulphur standards in Japan (Chan, 2007). Already, biodiesel blends is compulsory in Thailand while India wants to substitute 5% of the diesel consumption with biodiesel (Mukherji and Ramachandran, 2006). As such, the emergent biodiesel market is estimated to be worth US$1 trillion by 2020 (Wong, 2006).

But not everything’s perfect and the article offers caution:

-Uncertainty in biodiesel business-

Rising prices of the biodiesel supplies and decreasing diesel price is shaking investors’ confidence. Feedstock’s costs comprise 80% of biodiesel production and investment analysts have stated that palm oil diesel can remain lucrative only if palm oil, a raw material for biodiesel, is below US$450/ton (Foo, 2007). From 2006, the price of palm oil has increased to US$556/ton (Thukral, 2007). Moreover, regular diesel prices have dropped by 23% (Reuters, 2006)

In conclusion, the article encourages America to invest heavily in biodiesel because of the push worldwide for the cleaner fuel and favorable conditions in this country to make it happen. It says hedging investments can help diminish problems caused by rising biodiesel and feedstock prices.