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Biodiesel producers rejoice at new mandate for 2013

The renewable energy industry is applauding President Obama and the U.S. Environmental Protection Agency after the EPA approved a 28% increase in the amount of biodiesel mandated for use in trucks on the nation's highways for 2013. Biodiesel is made in a process that uses soybeans, while the production of ethanol is based on corn.
The president of the Iowa Renewable Fuels Association, Brad Albin, said, "I want to thank President Obama and his staff for listening to our concerns and recognizing the value and potential of America’s Advanced Biofuel—biodiesel.”
The biodiesel industry is celebrating because unlike mandates for the use of ethanol in the nation's fuel set forth in the 2007 Renewable Fuels Act, biodiesel didn't have a mandate until last year. That mandates set a goal of 800 million gallons. The new mandate for 2013 has been expanded to 1 billion gallons, and fell short of the 1.28 billion gallons that biodiesel producers wanted.
“This was an incredibly important decision, and the Obama Administration got it right,” said Joe Jobe, CEO of the National Biodiesel Board, the industry trade association.
“It will allow biodiesel plants across the country to invest and expand, creating thousands of jobs. At the same time, it sends a strong signal that the U.S. is standing firm behind its commitment to producing clean, American-made energy to strengthen our energy security and break our dependence on petroleum.”
When the mandate was introduced in 2011 at 800 million gallons, it helped prevent the closure of several of the nation's biodiesel plants.

Ethanol production has come under fire for driving up prices on the food crop, however, there is no indication that the same will happen for soybeans. 

Source: Desmoines Register

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Unlike E-85, Biodiesel makes sense
By Beenthere on 9/19/2012 9:08:33 AM , Rating: 2
Unlike the lie that is E-85, Biodiesel makes sense but mandating/subsidizing it's production with tax payer dollars is unscrupulous just as is subsidies and tax breaks on EVs. Our government caters to Big Biz and punishes most of it's citizens to pay for their crimes.

RE: Unlike E-85, Biodiesel makes sense
By Paj on 9/19/2012 10:23:15 AM , Rating: 2
Better get rid of all agricultural subsidies too. Let the invisible hand decide!

RE: Unlike E-85, Biodiesel makes sense
By dgingerich on 9/19/2012 12:17:17 PM , Rating: 2
except the cost to produce it is much higher than regular diesel. I've seen it quoted (in the comments posted on this story) that it costs $4.35 to produce a gallon of biodiesel, but that didn't include the cost reductions of soybeans due to subsidies (figure in a 40% increase in that cost) and the cost of actually transporting the components around. In all, it's probably closer to $6/gallon. Current market rate, without taxes, is about $2.5/gallon for regular diesel. With this mandate, we're increasing the cost of diesel fuel used by our transportation systems by about 15%.

It doesn't make sense right now. Perhaps, when oil come up in price to about $180/barrel, it might make sense in the future. When it does, a free market would take it up. Forcing it now only costs jobs, jobs we can't afford to lose right now.

RE: Unlike E-85, Biodiesel makes sense
By dlapine on 9/19/2012 12:49:49 PM , Rating: 2
What? Where do you get $6 from? What 40% increase in the cost of soybeans? Diesel costs $2.50 a gallon before taxes? I think you might be mistaken in your numbers.

Take a look here-

Taxes are just 13% of the cost of a gallon of diesel.

Soybean oil, open market, today is $0.55 a gallon. period, End of story. That's what you, me or anyone else can buy it for. Just like Brent crude oil is $108 a barrel. Any subsidy that US government pays the farmers is included in that price, just like the subsidies we pay the oil companies ($8B a year, last I checked) is included in the price of crude oil.

As for shipping costs:

Brent crude oil (at about $0.55 a gallon, strangely enough) needs to be shipped from the UK, to a refinery in Louisiana.

Soybean oil gets produced in Indiana and other places in the midwest.

You really think that the shipping costs for domestically produced soybean oil are higher than shipping fossil crude across the Atlantic ocean?

Lastly, the EPA mandates that BP, Shell and the other oil companies buy 1B gallons of locally produced biodiesel a year. This is at a ~10% premium ($4.35 versus $4.00), but how many gallons of fossil diesel do we use per year overall? 134 billion, so the effect of a 10% price increase on less than 1% of your supply is, well, nothing.

Any price increase you see at the pump is due to the board of Shell deciding that they'd like to have buy a third yacht this month, instead of their normal 2. They get to use the mandate as plausible reason for the increase, just not a real one.

RE: Unlike E-85, Biodiesel makes sense
By Solandri on 9/19/2012 2:53:27 PM , Rating: 2
Just like Brent crude oil is $108 a barrel. Any subsidy that US government pays the farmers is included in that price, just like the subsidies we pay the oil companies ($8B a year, last I checked) is included in the price of crude oil.

The U.S. uses about 7 billion barrels of oil a year, so a $8 billion subsidy works out to $1.14 a barrel, or less than $0.027 per gallon of petroleum distillate (like gasoline). Compare that to fuel taxes which amount to about $0.46 per gallon.

Using your $108 per barrel price, oil gets a 1.06% subsidy. Renewables like wind and solar typically get a 30%-50% subsidy relative to price of energy produced. Not that I think there's anything wrong with that - it makes sense to subsidize developing technologies more heavily. But you're completely off the mark if you're trying to argue the $8B indicates we subsidize oil too much and renewables not enough.

When comparing things with different quantities, you want to be comparing percentages, not absolute amounts. Otherwise I could claim a homeless shelter wastes money because it spends $100 a day on food while I spend just $10 a day. Never mind that the shelter is feeding 100 people while I'm just feeding myself.

RE: Unlike E-85, Biodiesel makes sense
By dlapine on 9/19/2012 3:20:07 PM , Rating: 2
Pretty sure you're comparing apples to oranges.

The point of a government subsidy an industry is to ensure that that industry survives in the face of a compelling pubic interest during a period of economic decline.

Kinda like how the Navy pays extra to have 2 manufacturers of aircraft carriers or submarines available now. It would be cheaper to just pay the best one, but it's in the public interest to keep two for various reasons.

There's absolutely no reason to pay profitable oil companies extra money to continue doing what they already do.

The appropriate quantity to compare here is how much money it will take to keep these industries in business for the duration of public need. For the Oil companies, that amount is $0. For the newly formed renewable energy companies, that amount is not $0.

The issue of subsidies is moot to this article anyways, as the article is about the mandated use of American-produced bio fuel.

By Solandri on 9/19/2012 11:51:20 PM , Rating: 2
The vast majority of the subsidies for oil companies goes towards new oil extraction techniques like shale oil. It's not money given to them to do what they're already doing as you're theorizing. They're new technologies being developed, and thus they're being subsidized.

I actually think subsidizing most of these oil extraction techniques (and "clean coal") are a mistake, as the price point where they become cost-effective is so high they'd only really be useful if oil permanently settled at $120+/bbl. Why subsidize research of a technique which will provide oil at $100/bbl, when you can subsidize research which can provide, say, $50/bbl equivalent?

But from a purely financial standpoint, it's an apples to apples comparison. Subsidies are going to new energy generation technologies, whether it be solar, wind, or oil.

The point of a government subsidy an industry is to ensure that that industry survives in the face of a compelling pubic interest during a period of economic decline.

No it's not. The point of a subsidy is to promote R&D (and maybe production) into a method or technology above and beyond levels dictated by simple market forces. That is, you subsidize something because you want to accelerate its development. Not because you want to keep some company around. The goal is new technology, not the survival of some company.

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