A couple of years ago, biodiesel production appeared to have a very bright future. World oil prices were on the rise, the price of petroleum diesel was moving past gasoline and every automaker seemed to be on the verge of introducing new diesel engines to the U.S. market. A federal tax credit of $1 per gallon for biodiesel producers prompted the launch of dozens of production facilities. But then it all went pear-shaped. The combination of the global financial melt-down causing a collapse in sales and the difficulty of meeting Tier 2 Bin 5 emissions standards meant most of the automakers planning to introduce diesels to the U.S. canceled those plans, and demand dropped.

Then the European Union imposed new tariffs on imported biodiesel, killing 95 percent of the export market for American producers. Finally, the beginning of a new year meant the expiry of the tax credit. With lower oil prices, biodiesel was no longer financially viable. Heading into 2010, the U.S. biodiesel industry is running at only 15 percent of its capacity, a situation likely to get worse as the year goes on. The House of Representatives passed an extension to the subsidy late in 2009 but it has yet to make it through the Senate. If the extension does get approved, it would still only provide a brief respite, unless oil prices start to rise significantly again.

[Source: Detroit News]

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