MFA Oil
By Tom May
Consumers and investors push biodiesel
Biodiesel production and demand are rapidly growing as Americans get behind the homegrown fuels movement. Midwest farmers and investors are following the successful footprint made by ethanol, and new production facilities are popping up across the rural landscape.
Biodiesel is a non-toxic, biodegradable, cleaner burning, renewable fuel made from fats and oils such as soybean oil. Biodiesel can be blended with petroleum diesel fuel in varying amounts the most popular of which are in the 5 to 20 percent range.
Characteristics of biodiesel increase cetane and lubricity in the user’s engine. Just a 1 percent blend of biodiesel can increase an engine’s lubricity by as much as 65 percent. You should consult the engine manufacturer’s guide to verify any limits or restrictions they may require.
Passage of the Renewable Fuels Standard has opened the door for expansion of infrastructure and the improvement in diesel fuel engine technologies. The tax incentives will allow for the production of biodiesel to exponentially grow and meet the needs of the nation’s transportation industry without increasing demand for foreign oil. At the end of 2006 there were about 90 plants in the nation producing an estimated 200 million gallons of biodiesel. That is nearly triple the 75 million gallons that was produced in 2005.
Looking to the future, there are almost 70 plants under construction all across the nation and another dozen or so plants that are expanding their production. The majority of the plants are in the eastern half of the United States. Biodiesel plants will continue to be built as investors see the profitability and the positive impact on local and state economies.
The economic impact on the Midwest from biodiesel production plants is tremendous. New jobs at the facilities are just the start of the positive ripple effect is being created.
The National Biodiesel Board released a study last fall detailing the economic boost biodiesel will provide. According to the study, which was funded by the soybean checkoff through The United Soybean Board, aggregate economic benefits of biodiesel include:
• The biodiesel industry will add $24 billion to the U.S. economy between 2005 and 2015, assuming biodiesel growth reaches 650 million gallons of annual production by 2015.
• Biodiesel production will create a projected 39,102 new jobs in all sectors of the economy during that same 10-year period.
• Additional tax revenues from biodiesel production will keep $13.6 billion in America.
This total impact of biodiesel on the economy includes the temporary impacts of construction, the permanent impacts of annual production and the direct value of biodiesel and co-products (glycerin).
The study also finds that if 498 of the 650 million gallons of estimated biodiesel demand in 2015 are produced from soybean oil, farmer-level soybean prices will increase nearly 10 percent. Using the USDA’s 2006 long-term baseline forecast for soybean prices as a starting point, the study predicts soybean farmers can expect the added demand for biodiesel to increase average soybean prices $0.58 per bushel by 2015.
With all of the positive momentum that is behind homegrown fuels, the future of biodiesel is looking pretty bright.
For more information about biodiesel visit the National Biodiesel Board website at www.biodiesel.org.
Tom May is director of marketing for MFA Oil.
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