America uses 65 billion gallons of non-gasoline fuel a year. The issue is volume. The US is the number one exporter of soybeans in the world. Soybean is a reasonable raw material source for biodiesel, at about 200 gallons yield per acre. The best source is Algae. Algae yield are over 2000 gallons of biodiesel per acre. Farmers don’t want Algae based biodiesel, they want soybean, corn, or animal fat. At best soybean, corn, and animal fat will provide 20% of the 65 billion gallons and require converting all agricultural fallow land into production. B20 makes sense in a non-energy crisis. B20 is 20% biodiesel and 80% diesel. B20 is very popular.

America’s likes big trucks and these big trucks use diesel engines to power them. Turbo Direct Injection is a key technology. TDI provides more power and a quieter biodiesel burning engine. TDI make diesel vehicles more attractive, but with diesel fuel exceeding $3 a gallon, consumers are looking for equivalent fuels that can be purchased at a lower price. Biodiesel looks good, for now.

Why is biodiesel growth accelerating in the US? Three reasons: 1. weakness in refinery capability 2. fuel traders betting that there will be future shortages, so they buy contracts to increase reserves causing temporary shortages and increased fuel price. 3. Environmental and political delays that slow down the extraction of shell and tar oil. Advocates of biodiesel like the fuel because of lower emissions (no sulfer, lower Nitride Oxide, and less complex hydrocarbon chains), economic benefits for agricultural corporations and special interest groups, and lubricating affect of engine parts. Customers appreciate a lower purchasing cost than diesel. Producers appreciate government subsidies, tax breaks, product incentives that allow the producer to sale an more expensive product for a lower price. Political support for biodiesel has brought attention and financial backing too bring the product too market. The fast growth profile associated with biodiesel will stretch debt limits. The banking system will need to be able to provide the stability for biodiesel to get established and accepted in the market. This will probably mean additional government assurances and financial reinforcement to give the appearance of confidence in this sector. Energy is a cyclic investment with strong peaks that gain interest but followed by long periods of disinterest. The energy sector is associated with heavy liabilities that eventually move investment close to the mean. As energy valuations move closer too the mean, biodiesel will experience more pressure to become competitive against oil. A handful of large Oil companies with their vast reserves of cash may/may not decide to keep alternate fuels alive. Oil companies will experience pressure from their shareholders either invest the cash reserves into infrastructure and alternate fuels or dividend payments. Oil companies can use Biodiesel as an environment friendlier fuel, as a marketing promotion.

However, Biodiesel can not provide Zero emissions. Zero emissions are only possible through electric or fuel cell cars. It would be interesting if biodiesel could be converted into hydrogen. If this connection were possible than biodiesel survival becomes more likely.

Hybrids have been very affective in large trucks, trains, and generators. Hybrids will rely on biodiesel to operate. Trains could migrate towards pure electric. Large trucks would remain the target long term.