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Full of beans.

ITEM: "Suddenly," reported The Olympian (Olympia, Wash.) for May 23, "biodiesel is not only cost competitive, it has a slight edge over regular diesel fuel. This is welcome news on several fronts. Motorists benefit in the pocketbook by cutting down on fuel costs."

ITEM: President Bush praised biodiesel "as 'one of our nation's most promising alternative fuel sources,' as he stepped up pressure on the Senate to pass his energy bill, ... reported the Los Angeles Times for May 17.... In touring the [Virginia] plant, Bush sought to highlight an emerging fuel that is relatively clean-burning and has grown in production from 500,000 gallons a year in 1999 to 30 million gallons last year--an increase that makes biodiesel the fastest growing alternative fuel in the country...."

ITEM: "A few years ago," reported the Bremerton (Wash.) Sun for May 22, "the idea of running your car on a product made from soy beans or used cooking oil seemed like a wild scheme concocted by fringe environmentalists. Today, biodiesel is on the verge of going mainstream...."

CORRECTION: Both motorists and the economy as a whole would truly benefit if biodiesel could be produced at slightly less cost than regular diesel fuel, but that, unfortunately, is not the case. The above accounts dramatically downplayed or ignored the fact that biodiesel is "on the verge of going mainstream" only because it is priced artificially low because of government subsidies. Some do benefit when the market is rigged through subsidies, but the economy as a whole is hurt. Motorists may pay less at the pump, but they will be paying more through their taxes.

Biodiesel is following the path of ethanol, whose main ingredient is subsidized corn; biodiesel in this country is usually derived from soybeans, another subsidized staple. Such federal subsidies for biofuels have helped make agribusiness giant Archer Daniels Midland (ADM) very wealthy, totaling many billions of dollars over the years. One study a few years ago, for example, found that every dollar that ADM had made in profits cost American taxpayers 30 dollars.

Yet, according to Professor Tad Patzek, a chemical engineer at the University of California, Berkeley, "in terms of renewable fuels, ethanol is the worst solution. It has the highest energy cost with the least benefit." Ethanol uses more fossil energy in its production than the energy it contains, says Patzek. The professor has made similar comments about biodiesel, with his research indicating that producing soy diesel requires a 27 percent loss of energy. "We are chasing phantoms," Patzek told Forbes magazine. "And we're chasing them because they produce valuable subsidies. We are being duped."

Also swimming against the tide, Vaclav Smil of the University of Manitoba says that the energy loss in producing biodiesel is akin to what happens with ethanol, but on a smaller scale. "Of course biodiesel is physically doable, but it doesn't make sense," Smil says.

While other plant oils can be used, soybeans have become the main source for biodiesel in the United States. Why? Subsidies. "The soybean farmers of the biodiesel industry have a similar story to that of the corn farmers," noted John Orr of Long Trail Biofuels in New Farm magazine, "ADM has secured most of the market and subsidies. And whether you're producing soybeans or corn, current large-scale agribusiness practices demand abundant amounts of fossil fuels. Although biodiesel is more energy-efficient than ethanol ... petroleum-derived alcohol is one of the main ingredients in its processing."

How does this biofuel compete with petroleum? During the past year, the feds began to subsidize biodiesel to the tune of $1 for every gallon. That subsidy, reported Forbes for June 6, "brings the wholesale cost of a gallon of pure biodiesel down from $2.65 to $1.65, roughly what it costs to produce a gallon of diesel fuel out of Iraqi crude. The subsidy is having the desired effect. Biodiesel production is on track to double this year, and suddenly there are plans for biodiesel refineries sprouting up all over [the] nation that will double again the country's capacity in another year or so."

Those incentives are supposed to expire at the end of 2006. Yet, "temporary" has a different meaning in Washington, where there is still a temporary federal excise tax on telephones left from the Spanish-American War. Friendly legislators and those receiving biofuel subsidies don't want the handouts to stop. Unsurprisingly, the American Farm Bureau Federation strongly supports current bipartisan legislation to extend the biodiesel incentive to 2010. Temporarily of course.
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Title Annotation:biodiesel fuels' cost impact
Author:Hoar, William P.
Publication:The New American
Geographic Code:1USA
Date:Jun 27, 2005
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