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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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The Biofuel Boom Could Threaten Food Security

Sustainable aviation fuels seem to be the future of air travel, according to industry insiders seeking to reduce the industry’s carbon print. Refiners are on board, just as they are on board with a planned major boost in biofuels production during the Biden administration. Farmers are certainly on board. And the prices of vegetable oils are already rising to multi-year highs, driving up prices of other foodstuffs to the highest since 2014.

Reuters’ Naveen Thukral and Gavin Maguire earlier this month wrote that vegetable oil prices have risen to near-record highs since President Biden made clear that a substantial increase in the production of biofuels will be an important part of his energy transition agenda. This, they noted, pushed the UN food index to the highest in seven years. What this means is that food is becoming more expensive for poorer people in developing economies such as India and many African countries.

To be fair, the Reuters analysis also notes seasonal and non-regular factors at play in the higher vegetable oil prices, including labor shortages at palm oil plantations in Asia and harsh weather in key producing regions. Restocking after coronavirus lockdowns was also among the factors pushing vegetable oil prices up. Yet even if these factors were absent, we are in for more expensive vegetable oils because of the energy transition.

UK-based research consultancy for energy technologies Thunder Said Energy recently reported that global biofuels production could rise from 3.5 million barrels of oil equivalent daily to as much as 20 million boepd as part of the cleaner energy push.

This must be great news for farmers, and it’s not too bad for refiners, either: Philips 66 last year said it was going to turn a refinery in San Francisco into a biofuels plant. Marathon Petroleum is preparing to turn its Martinez refinery into a biofuels plant, too. French supermajor Total has a whole biofuels strategy on its agenda.

Last month, several airline CEOs met with Biden administration officials to discuss emissions and the options for government incentives for aviation biofuels as a way of reducing these emissions. These fuels could reduce the aviation industry’s emissions by more than a third, according to the head of the European industry association Airlines for Europe. And yet, they are going to make cooking oil a lot more expensive in the process. Not only that, but they—and biofuels s a whole—could drive large-scale deforestation.

A biofuels supply increase from 3.5 million boepd to 20 million boepd, according to Thunder Said Energy, would require another 100 million acres of land to plant and grow the crops necessary for their production. That’s despite what the authors of the report call a generous assumption that the industry would capture all the waste oils and other waste-based biofuels feedstock the world produces, which is certainly a stretch.

So, even with the capture of all waste that can be converted into biofuels, we would need to clear 100 million acres to plant oil-producing crops. According to the consultancy, reforesting 100 million acres would offset eight times more carbon dioxide emissions than planting these 100 million acres with crops to use for the production of biofuels.

Related: Oil Bulls Beware: This Optimism Is Unjustified

Cooking oil is an essential foodstuff across the world. In India, people are already starting to curb their use of it, however, because of higher prices. Reuters’ Thukral and Maguire quote a vegetable oil broker from India as saying expectations of greater cooking oil demand after the end of pandemic-prompted lockdowns are already being shattered as higher prices destroy demand. And those converted refineries in the U.S. haven’t even started to churn out barrel after barrel of biodiesel.

Interestingly enough, not all environmentalists are fans of biofuels.

“Biofuels are false solutions that don’t decarbonize air travel,” Clare Lakewood, a climate-law official with the Center for Biological Diversity, said last month in comments on the airline CEOs meeting with government officials. “Real action on aircraft emissions requires phasing out dirty, aging aircraft, maximizing operational efficiencies and funding the rapid development of electrification.”

Indeed, biofuels are not exactly emission-free. They are much cleaner than fossil fuels—about 50 percent cleaner—but they do emit carbon dioxide, which would hardly sit well with supporters of the absolute-zero vision for the energy future of the world. But there is something else as well. Biofuels are expensive to produce. According to Thunder Said Energy, cheaper biofuels have a breakeven level of $70 a barrel. The more expensive products—such as sustainable aviation fuels or SAFs—have much higher breakeven levels, some reaching $125 per barrel.

According to the consultancy, this means that crude oil needs to become a lot more expensive than it is now to justify a major shift to biofuels. Yet, according to proponents of low-carbon energy, costs are not an issue because the top priority is cutting emissions. But add to the high costs, the deforestation risk and the threat to the food security of vulnerable communities, and biofuels stop looking like a simple, elegant solution to the emissions problem of the transport industry.

“There is this age-old argument about food versus fuel but no one dare talk about it as it is all about green energy now,” edible oils analyst Dorab Mistry told Reuters’ Thukral and Maguire. “It will take a long time, and noises from the developing countries, before people actually try to slow down the rate at which green energy is being produced.”

Perhaps it is time to start talking about this and all the other problems accompanying the green energy push. After all, talking about a problem is the first step to solving it.

By Irina Slav for Oilprice.com 

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Leave a comment
  • George Doolittle on March 28 2021 said:
    Plant based anything (food, fuel, building material, etc) requires massive amounts of water let alone arable land and the massive logistics involved in the movement of ahem "green products" ahem.

    Long Norfolk Southern
    Strong buy.

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