Oil Prices Driving Volatility in Biofuels Market Outside North America
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The growth of the biofuels market outside of North America depends on feedstock prices and the price of oil. BCC Research reveals in its new report that the industry faces the worst situation for profitability, high feedstock and low oil prices. This factor, along with continued tight credit markets, is preventing plant expansions and construction of new projects.
Biofuels account for just 1 percent of world fuel consumption. Conventional energy resources, mainly fossil fuels, are becoming scarce as worldwide demand increases rapidly. A growing imbalance in energy demand and supply affects consumer prices as well as the environment, prompting a search for new sustainable energy resources. Biomass is one such environmentally sound renewable resource from which various fuels can be manufactured. This report refers only to liquid fuels.
The global market for liquid biofuels outside North America reached $41.7 billion in 2015 and is projected to reach $89.6 billion in 2020, reflecting a five-year compound annual growth rate (CAGR) of 16.5 percent. Second-generation biofuels represent about 5 percent of the market. Ethanol and biodiesel production will grow at slower rates than the biofuel market value due to rising fuel prices. The same behavior was observed in second-generation biofuels.
The market has grown more than expected, thanks to a rise in oil prices after the global economic slowdown that began in 2008. The market also has shown high volatility, which has promoted faster growth in the biofuel market. The rapid growth of biodiesel consumption in Asia-Pacific is led by Indonesia, Thailand and China, while in South America, Brazil and Argentina are leading the region. The ethanol market also has registered rapid growth in Asia, led by India and Thailand, and in the Benelux (Belgium, the Netherlands and Luxembourg) countries of Europe. In addition, hydrogenated vegetable oil is starting production in Asia and Europe, where rapid growth is seen at nameplate production capacity.
Most market growth will take place in a few EU member states, Asia-Pacific and in South America, excluding Brazil. The Africa and Middle East regions will remain under development due to a lack of investment.
Biofuels will continue to show the greatest penetration in developed countries, although demand in emerging countries could show gains with government-level support and investment. Regional use of biofuels depends in large part on retail prices compared with the local cost of fossil fuels. Countries with higher conventional fuel costs will still likely see greater use of the relevant biofuels. This means that biofuels may find similar penetration in developed and emerging countries.
The most important driver for the interest in all alternative fuels, including biofuels, is the high price of oil, which during the past six years has shown high volatility, after reaching a record price of almost $145 per barrel. At press time of this report, oil has collapsed to about $50 per barrel from $100 per barrel.
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