The True Cost of Sustainable Biodiesel

Biodiesel will become cheaper than petroleum diesel but it won’t be because the price of biodiesel goes down. This change will occur because the price of petroleum will continue to rise. A good place to start to understand some of the factors that affect the price per gallon of biodiesel is to ask where does your fuel come from? Was it locally produced or did it travel across the country or around the world by train, truck, or ship? What is your fuel made from: virgin soy bean, corn, canola, tropical palm oil, rendered animal tallow or waste vegetable oil and inedible kitchen grease?
The base cost of each gallon of biodiesel is the sum of raw materials costs (vegetable or animal oil feedstock, methanol, catalyst, heat), market influences of supply and demand, and taxes. Additional items that affect the final cost are transportation, distribution, permits, state regulation, and consistent quality assurance of the fuel.

It’s all about the oil! Restaurants have typically been paying $40 to $60 for oil collection services. With the new demand for feedstock, biofuel producers are offering to collect for free. Some producers are even starting to pay restaurants for their grease. Waste oils, usually referred to as yellow grease and brown grease are traded in the commodities market. Market price is listed on indexes such as The Jacobson and can fluctuate significantly as we have seen recently with increases of 40% in a few weeks. Other feedstock prices such as soy beans have risen as much as 94% in the past year. The world is now facing the most severe food price inflation in history as corn, grain and soybean prices climb to all-time highs. One key factor in these increases is the record cost of crude oil which recently reached a high of over $129/barrel. As the world’s main source of energy, the cost of petroleum has significant repercussions on many other resources. The importance of having a local sustainable source for fuel has never been more important. As energy costs rise, so will the cost of alternatives. The less energy involved in producing these alternatives, the better able we will be to control these cost increases.

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