Biofuel Bust

As noted in this Seattle Times article, at one time biofuels were thought to be an economical alternative to petroleum if crude oil prices rose enough:

The rush to produce biodiesel was a gamble, assuming that skyrocketing petroleum prices would soon make veggie fuels reasonably cheap by comparison.

And as oil prices soared past $100 per barrel in recent months — and a new closing record of $138.54 on Friday — the region's biodiesel industry should have been awash in cash.

But to the surprise of the industry and its supporters, the cost of making biodiesel has outpaced the rise in fossil-fuel prices.

Customers and venture capitalists are abandoning biodiesel, since the cost of production is not, and may not be in the foreseeable future, competitive with the cost of petroleum products.

What will happen in a few months, when the State of Washington requires that 2 percent of diesel fuel sold in this state be biodiesel? Roughly 1 billion gallons of diesel fuel is purchased annually in this state now, so that would be 20 million gallons of biodiesel fuel starting in December 2008. Ironically, the article states that this is the amount exported from Washington in the latter half of 2007 to places where the price is somewhat more competitive:

According to the Department of Licensing, some 20 million gallons of Washington biodiesel were exported to Europe and Canada in the second half of 2007 — about four times the amount that was sold locally.

The very visible hand of government is all thumbs.