The biofuel factor on oil prices

Not long ago bioethanol and biodiesel were fringe fuels, but recently they have been making a subtle, but material dent in the US transportation market. Were it not for the effects of the global recession, the growing biofuel trend would have been even more noticeable.
Let’s look at the numbers: until 2003, biofuels provided about 0.5% of the energy to turn transport wheels and propellers in the United States. Environmental and energy security issues came to a focal point under the final term of the Bush administration and provided the catalysts to stimulate (mostly through subsidies) meaningful growth of biofuels in the nation’s transportation fuel mix. The results were almost immediate: within a year, by the end of 2004, the market share of biofuels more than doubled to 1.1%. Growth was unabated through to 2008 when penetration reached 3.0% and 2009 data shows further increases despite the recession.

In terms of volume, biofuels in the US transportation market (mostly bioethanol and biodiesel) now compose around 400,000 barrels per day (after compensating for the fact that a fuel like ethanol has 75 percent less energy than gasoline). At the margin, where oil is priced, these are significant volumes when you consider that a drop off of only 2.5 MMB/d in global oil demand completely hosed down the price of oil over the past year.

Calgary Herald