I've gotten many questions on what goes into the price - as you all know, the price of both petroleum fuel and biofuel has been going up and up. (While writing this article, the price of a barrel of crude oil has hit $118.28, a price far higher than forecasted.)
SeQuential has received numerous inquiries to why this is happening, and like everything in the world, there are many factors that go into the equation. This is not meant to be a complete list, but an overview of some of the key influencers. Feel free to post any comments or questions!
Without getting into a discussion on how much oil is left underground, there is a very real constraint on oil output: refinery capacity. Since 2004, refinery output worldwide has not increased.
Demand from Developing Countries
The demand for petroleum by developing countries, mainly China and India, has put a strain on the already limited supply of petroleum. Classic economics shows that when there is a supply-demand imbalance, prices raise.
Weak US Dollar
The US Dollar has been loosing value as compared to other world currencies. Since the US imports about 60% of its petroleum, the dollar is not able to buy as much petroleum as it used to.
Effect on Biofuel
Like it or not, the price of petroleum has an effect on absolutely everything in our lives, even the price of locally produced biofuel. Every day in Oregon, only 0.7% (0.007) of the total fuel used is biofuel. SeQuential sources products from companies that use biofuels as much as possible, but the reality is that most companies use petroleum fuel, tying us and our prices to the rises in the price of petroleum.
Effect on Food Prices
There have been many articles in the news as of late on how the growing use of biofuel has impacted the price of food worldwide. This is an issue that SeQuential takes very seriously; there is a wrong way and a right way to produce biofuels. Wherever possible, SeQuential uses recycled or locally grown products and the most efficient processes for fuel production.
Our sourcing principle:
- Best – regionally-produced from regionally-available feedstocks. Emphasis on waste products and recycled products.
- Better – regionally produced from domestically sourced feedstocks.
- Good – domestically produced from domestically sourced feedstocks.
- Unacceptable – biofuels that have a negative energy balance or are produced from imported feedstocks. (Brazilian soy or Malaysian palm oil.)
The effect of petroleum prices, currency imbalances, worldwide crop failures and growing demand of developing nations for meat (which requires large amounts of corn and other grains) has been largely overlooked. Given the relative small size of the biofuel industry, these other macroeconomic factors have a much larger influence. For more reading: NY Times.
SeQuential is committed to finding ways to avoid competing with food crops, such as using Used Cooking Oil or Canola and Camelina grown regionally in rotation with grass seed and other crops.