Biodiesel: An Industry Poised for Growth?

Development of a domestic biofuels industry that increases production of liquid biofuels from renewable resources is a priority policy objective of the United States and a number of individual states. Biofuels are expected to reduce dependence on imported petroleum with associated political and economic vulnerability, reduce greenhouse gas emissions and other pollutants, and revitalize the economy by increasing demand and prices for agricultural products. Although most attention focuses on ethanol, interest in biodiesel is also increasing. Biodiesel is primarily produced from soybeans. However, other oilseed crops offer potential, especially in arid western regions of the US. The purpose of this article is to compare the physical properties of biodiesel with existing petrodiesel, review key demand factors and other policies that are stimulating increased interest in biodiesel, and summarize the present economics of its production and marketing. Although both federal and state policy outlooks remain favorable, and much optimism exists among agricultural groups, present costs of producing biodiesel exceed petrodiesel by $0.20-0.50/gal.