With many fuel sources failing to stay ahead of demand, crop-based fuels such as ethanol and biodiesel are becoming a major component of the global energy supply, despite growing concerns about their impact on the environment and world food prices.Global production of biofuels is rising annually by the equivalent of about 300,000 barrels of oil per day, which goes a long way toward meeting the growing demand for oil, which last year rose by about 900,000 barrels per day.
Without biofuels, which can be refined to produce fuels much like the ones made from petroleum, oil prices would be even higher. Francisco Blanch, a Merrill Lynch commodity strategist, says that oil and gasoline prices would be about 15 percent higher if biofuel producers were not increasing their output. That would put oil at more than $115 per barrel, instead of the current price of around $102. U.S. gasoline prices would have surged to more than $3.70 a gallon, compared with an average of a little more than $3.25 today.
Biofuels are playing “a critical role” in satisfying world demand, according to Fatih Birol, chief economist of the Paris-based International Energy Agency. Without them, “it would be much more difficult to balance global oil markets,” he said.
This increase is happening amid growing concern about the impacts of using biofuel as a source for energy, including its environmental impact and the way the demand is pushing up the price of corn and other biofuel crops, which has triggered a rise in global inflation and protests in poor nations.
Many environmentalists now believe biofuels contribute substantially to greenhouse gases — those responsible for global warming — instead of reducing them, as was previously believed, in part because farmers clear forest land to grow biofuel crops. Scientists say deforestation causes a large, quick release of carbon into the atmosphere when existing plant life is destroyed.
But, as global energy consumption grows, “there will be pressure to continue relying on these sources regardless” of their negative impacts, said Jeff Brown, a Singapore-based economist at consulting firm FACTS Global Energy Group. “The only other choice is higher [oil] prices”
