Declining fuel prices mixed bag for biofuels

Source: By Will Robinson, Brownfiel • Posted: Thursday, August 4, 2022

An ag economist says declining fuel prices are altering the demand for biofuels.

The University of Missouri’s Ben Brown says that’s because of an increasing global oil supply, pointing to the U.S last week…

“It was reported that six new [oil] rigs came online to bring us up to just over 6,000 rigs here in the United States,” he said.

Brown said that’s a return to pre-COVID levels.

He tells Brownfield falling fuel prices could be positive for ethanol demand.

“We blend ethanol with oil,” he said. “If oil gets cheaper and gas prices get cheaper, we naturally as consumers consume more of it. And if we’re consuming more oil, we’re also consuming more ethanol.”

But Brown said it could be a bad sign for oilseed-based fuels… as they compete with oil fuels.

“They compete more frequently and they compete at a larger margin,” he said. “And so, as oil prices come down, that’s going to weaken the incentive for renewable diesel and biodiesel.”

Brown made his comments during Brownfield’s recent Weekly Commodity Market Update.

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