Saturday, June 16, 2007

High feedstock prices equates to a slowdown in the biodiesel rush!

An interesting read from ICIS Chemical Business caught my attention. Not only did the article highlighted problems associated with the "thoughtless rush" to biodiesel production, it confirmed the AnitoKid's views on the food vs. fuel debate. Apparently, increases in feedstock price have forced Malaysia to either scale back biodiesel production activities or close until the economics for plants improve. Only five biodiesel plants are currently operating in the country because crude palm oil prices, the nation's main feedstock, have risen to an 8-year high. And when prices soar, the profitability of producers is significantly reduced.

other plants also face the ax unless they start up operations within the next two years. Many of the producers (more than 90) that have been issued licenses have decided to delay commercial operation or close the plants until raw material prices fall. Indeed, the adage "Haste makes waste" holds true on this one! What about the biodiesel plants (less than 10) in production? The only reason they are running is because of their tied up contracts with European and other overseas clients. Hmmm, less than 10 running plants running against the more than 90 stalled units? Something is definitely wrong with this picture. This scenario simply highlights two immediate facts, i.e., that securing overseas customers is very important in generating income when feedstock prices have grown out of control (high raw material price environment), and that in the food vs. fuel debate, the current state of world economics heavily favors the first choice (food).

Let me reiterate it again. The AnitoKid is not against the use of biofuels, e.g., biodiesel. Their use may be beneficial for fuel supplies, but promoting their usage to unsustainable levels under current technology and economic state will bring a lot of problems, issues and concerns. And by the end of 2010, I believe that we will be seeing a much lower percentage of biodiesel projects breaking through.

All in all, the slowdown in Malaysia is a very good lesson for the Philippines and other nations engaged in the biodiesel rush. In the meantime, why don't we push for the implementation of best practices in energy conservation from leading global firms? Waste not, want not. And I kid you not!

These are my thoughts. What are your views?


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