Oil Price Drop Takes Toll on U.S. Biofuels Industry

Biodiesel producers strive to stay competitive while trucking companies consider business case for diesel versus natural gas.

January 12, 2015

NEW YORK – With gasoline and oil prices reaching their lowest levels in five years, “greener, cleaner alternative fuels are taking a hit,” writes the Business Times.

The news source writes that biodiesel producers are “slashing prices and margin” to stay competitive, as the price of diesel is 20% lower than it was a year ago.

Asheville, North Carolina-based Blue Ridge Biofuels, which makes biodiesel from used restaurant cooking oil, says sales at its four retail gas stations in the area are down 40% since July. "There is another station across the street," Woody Eaton, Blue Ridge's chief executive, told the news source, adding that customers "can see the price difference."

The biofuels industry is still tiny, but government mandates have underpinned its growth in recent years. Production of biodiesel has risen steadily, climbing to nearly 1.8 billion gallons in 2013 from 1.1 billion gallons in 2012, according to the National Biodiesel Board.

But it will be difficult for any new production to come online this year given the business climate, said Joe Gershen, vice chairman of the California Biodiesel Alliance.

For ethanol, the news source writes that low corn prices advanced U.S. ethanol production to record levels in 2014, along with strong margins for producers. "We still see a positive margin, but not nearly what we saw last calendar year and last quarter," Jim Seurer, CEO of Glacial Lakes Energy LLC, an ethanol producer based in Watertown, South Dakota, commented, adding that he has no immediate plans to scale back production as long as margins remain positive.

Natural gas as an alternative for diesel fuel in heavy duty trucks is also waning – the slimmer price differential between the two fuels “means it will take longer for truckers to recover the roughly $50,000 added cost of a natural gas truck,” notes the news source.

Heavy duty truck brands such as Freightliner, Volvo and Mack also expect demand for natural gas trucks to slow.Sales will likely be steady during 2015 across the industry, after growing about 50% per year since 2012.

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