Global Ethanol Tops 85 Billion Liters as OPEC Complains

Global ethanol production will top 85 billion liters this year. The 2010 forecast predicts a 16 percent increase in global production over 2009 actual production despite a very challenging year for the industry particularly in the United States where the industry experienced margins squeezed by low fuel prices and higher than normal feedstock prices.

Despite this difficult year, the United States continues to lead the world in ethanol production and will produce over 45 billion liters of the world’s output this year. The U.S. growth in production continues to be driven in large part by federal laws requiring mandated blending and a Congress obsessed with energy security and energy policy. Rules outlining the so-called “RFS2” were released last month providing for a 36 billion gallon market in the U.S. by 2022.

Not all jurisdictions had an easy time in 2009 convincing governments to adopt biofuels-friendly policies. Europe continues to twist itself into knots over sustainability issues being trumpeted by powerful NGOs on the continent. While the European Commission has mapped out an aggressive plan for growth in biofuels, details of the plan are bogged down in debate over how to measure the green house gas benefits from these new fuels. Despite these apparent challenges there will be modest growth in ethanol output in Europe this year.

On the African continent there continues to be a simmering issue partially related to biofuels in the form of land lease deals. Many African countries still recovering from the shock of $147 oil in 2008 have turned to biofuels as a partial solution to their oil dependence. This interest in biofuels has had the positive impact of generating much needed investment in agricultural and land lease agreements for feedstock production. Some of these deals have been called into question because the lack of transparency with some of the transactions.

In 2009, the Global Renewable Fuels Alliance called on the United Nations to develop some guidelines for long-term land deals in Africa associated with investment in biofuels production. To date, there has been muted response from the UN on this issue. Once again, corruption and a lack of transparency threaten to rob African nations of a significant opportunity – this time it is related to biofuels production and energy independence.

In a somewhat ironic turn of events, this report on growing global biofuels production coincided last week with the release of a report co-authored by the former Secretary General of OPEC blaming biofuels for increasing world crude prices. The report suggests that under investment in drilling and oil exploration is a direct result of our growing obsession with developing biofuels markets.

With ethanol production forecasted to replace approximately 350 million barrels of oil this year out of a total world demand for 85 billion barrels it seems highly unlikely that ethanol is driving global crude prices anywhere. That being said, it appears that after many years of dismissing biofuels and a petty annoyance, middle-east oil producing countries may finally have biofuels in their sights.

source: thecuttingedgenews