Renewable Liquid Fuels: Current Situation and Prospects

Ethanol produced from grain and biodiesel produced from vegetable oils and animal fats are the major renewable liquid fuels being produced in the United States. Cellulosic ethanol and Fischer-Tropsch diesel are also renewable liquid fuels of considerable interest, but additional development is needed before they become significant parts of the renewable liquid fuels market. Thus, the discussion in this article will focus on ethanol from grain and biodiesel. The production and use of both fuels has been favored by state and federal government programs. The rationale for this encouragement is not only to improve the air and water quality and reduce dependence on foreign oil, but also to shore up farm prices, save on farm program expenditures, and promote economic growth in rural areas. Both fuels have increased in consumer acceptance as the quantities consumed have increased in recent years, and the recent increases in petroleum prices have stimulated interest in the possibility of producing both fuels as extenders of the gasoline and diesel fuel supplies. This paper discusses the drivers behind the rapid growth in ethanol and biodiesel production and use, and the prospects for continued growth in the future. It briefly notes the economics of production under current price conditions and U.S. capacity to produce larger amounts of these fuels from agricultural products.