Biofuels at risk

Des Moines Register
Green Fields: Agriculture and Alternative Energy
By Philip Brasher • pbrasher@dmreg.com • May 11, 2009

The ethanol industry is in a slump, and the biodiesel business is all but a standstill. Are there some lessons that could be learned from this that can be applied to next-generation fuels? Ross McCracken, editor of Platts Energy Economist, thinks so and he’s laid them out in an analysis.

Biofuels producers didn’t take into account sufficiently the potential risks of a downturn in energy prices, or the possibility that agricultural commodity prices could increase sharply, according to McCracken.

“Three elements appear to have been missing in the assessment of market risk; a lack of understanding of the dynamics of the agricultural markets that governed feedstock prices; a complimentary lack of focus on the differential between oil and feedstock prices; and an underestimation of the increased impact that even seemingly marginal activities would have on an already stressed supply chain.”

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