India closing biofuels plants, Brazil opening them

Falling oil prices are starting to claim some biofuel casualties in India, with biodiesel not being able to compete at the pump. With crude oil dropping to around $50 per barrel, diesel in India currently costs around Rs 36 per litre (US$3.10 per gallon) which makes biodiesel at Rs 41 per litre ex-factory plus taxes look very expensive. The India Times quotes the managing director of a biodiesel company in Maharashtra as saying, "With such a stark difference, we have no option but to shut down production for now."

As ever, the final price of biodiesel comes down to the price of your feedstock and Indian farmers can currently produce jatropha curcas seed for Rs 12,000 per tonne. It is expected that this will have to fall to Rs 10,000 per tonne before biodiesel is economical again. Jatropha can only become cheaper if more farmers grow it, but the three-year lag between planting and the first harvest is too long for small farmers to survive.

In South America, Dow Jones Newswires is reporting that the Brazilian Energy Minister has predicted that Brazilian companies and other investors are likely to invest an estimated 17.4 billion Brazilian reals (US$8.1 billion) in the country's biofuels sector over the next four years. This investment should yield a confirmed 77 new ethanol mills and 46 new biodiesel plants by 2010.

The investment will increase Brazil's biofuels output to 23.3 billion liters / 6.1 billion gallons of ethanol, and 3.34 billion liters / 882 million gallons of biodiesel. This represents a 33 percent increase in ethanol production and a four-fold increase in biodiesel production over 2006/2007 levels. State-owned oil firm Petrobras SA is leading the charge with massive investment in both ethanol and biodiesel facilities.

Analysis: Clearly Petrobras has the muscle to forge ahead with biofuels in the face of lower oil prices where small, Indian farmers do not. Petrobras themselves are a huge oil producer so they win either way. Arguably the true cost, including environmental concerns, of petroleum fuels is not reflected by cheap oil, but knowing that doesn't improve the bottom line for smaller biofuels producers.

[Source: India Times & Cattle Network]

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