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Biodiesel Makes Headway as the Price Gap Narrows

November 9, 2004

Soaring petroleum prices have narrowed the price gap between conventional oil-based diesel and more expensive biodiesel made from American soybean oil, according to the Associated Press. The escalation in petroleum prices has delivered the most favorable marketing moment for biodiesel and other alternative energy sources in 25 years. It has bestowed an immediate windfall on some companies and helped to assure the place of alternatives in the future energy mix. But even ardent advocates expect the foreseeable future to look much like the present. Their little sector can only grow so fast, even with a welcome shove from pricier petroleum. "Right now, every gallon that gets made gets sold," said ethanol market developer Ron Lamberty at the American Coalition for Ethanol, a trade group that promotes the corn-derived gasoline substitute. "The push - it had already started." The new enthusiasm has been particularly strong for ethanol and biodiesel, both U.S. crop-derived fuels blended with conventional transportation fuels as extenders. The more established ethanol industry put out a daily average of 225,000 barrels in August, a new high, according to the Renewable Fuels Association. With the price gap closing, though, the industry sold about 20 percent more biodiesel over the past year, for a total of 30 million gallons, the Biodiesel Board estimates. A recently-passed federal tax credit, worth up to 20 cents a gallon to blenders, will probably push biodiesel prices much closer when it takes effect in January.
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