Piedmont Biofuels is a worker- and member-owned cooperative in North Carolina. Their stated mission is to lead the grassroots sustainability movement in North Carolina by using and encouraging the use of clean, renewable biofuels.

They also publish Energy Blog, which often provides good insight from the producer side. Today’s post on the price of biodiesel is a worthwhile read, especially for the explanation of the pricing dynamics.

Some extracts follow:

The price of biodiesel just went up. Just as everyone is clamoring for cheap fuel. Our phones are ringing off the hook, not out of interest in renewables, but from pressure from petroleum pricing. [...]

We are holding our selling price at 3.50 a gallon, and we do have some fuel on hand, but forget about making any money by selling it at that price.

Those on the edge of the industry are outraged. They mention conspiracy, and claim our suppliers are “greedy bastards,” and would love to cite their constitutional right to cheap fuel. Too bad the founding fathers left that part out. My understanding is they felt markets were an efficient way to deliver goods to those in need.

North Carolina is the fifth largest biodiesel consuming state in the country. Its state contract stipulates that the fuel sold here will come from soy. And the state contract has been awarded to World Energy in the west, and Potter Oil in the east.

We are in the middle, and tend to buy from World Energy. World Energy cannot ship non-soy based fuel into North Carolina, since most of their customers are buying on state contract. Potter Oil gets a lot of its supply from West Central Soy, who has customers on allocation right now. [...]

In those instances where biodiesel is cheaper than petroleum, it gets snapped up by the general public, rather than those dedicated to biodiesel. Construction fleets, cement makers, and transportation intensive industries of all types—the same ones who were previously afraid to let B2 touch their precious engines, are buying biodiesel to reduce their fuel costs. [...]

All of which doesn’t fundamentally answer the question of when will the price of biodiesel fall? Simple: when there is a surplus.

Biodiesel pricing will come down when petroleum demand eases (if it ever does). Or when the production capacity in this country increases. Before people freak out about their God-given right to cheap fuel, they need to realize that this is how the industry is birthed. One of the reasons Europe has a biodiesel industry, while ours is merely fledgling, is that governments there used policy levers to make biodiesel more economical than petroleum.

And as for production capacity? We are working on it.