Biofuels - OECD-FAO Agricultural Outlook 2013-2022

 

Ethanol production is expected to increase 67% over the next ten years with biodiesel increasing even faster but from a smaller base. By 2022, biofuel production is projected to consume a significant amount of the total world production of sugar cane (28%), vegetable oils (15%) and coarse grains (12%).

 

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Market situation

World ethanol prices declined early in 2012 but regionally, market conditions varied. In the United States, ethanol prices began to rebound later in the year as the extent of the drought in the United States became apparent, driving up feedstock prices. In Brazil, an improved sugar cane crop in the latter half of the year improved supplies and pulled down domestic ethanol prices.

World biodiesel prices fell in 2012 off record highs in 2011, in a context of strong vegetable oil prices ‑ partly due to the drought in the United States ‑ and high crude oil prices. Contrary to ethanol, global biodiesel production did increase in 2012. The four major biodiesel producing regions (the European Union, the United States, Argentina and Brazil) increased their supply and production in Malaysia recovered from a historical low in 2011.    


Projection highlights

  • Ethanol and biodiesel prices are projected to return to an increasing trend given the expected high crude oil prices and biofuel policies around the world that promote biofuel demand. However, evident uncertainties around the implementation of policies will continue to significantly affect biofuel markets.

  • Global ethanol and biodiesel production are both expected to expand, mainly driven by demand promoting policies and reach respectively 168 bnl and 41 bnl by 2022. This amount should require 12%, 29% and 15% of world coarse grains, sugar cane and vegetable oil production respectively. Ethanol markets are dominated by the United States, Brazil and, to a smaller extent, the European Union. Biodiesel markets should be dominated by the European Union and more marginally by the United States, Argentina and Brazil.

  • At the end of the outlook period, biodiesel should become more competitive in the United States because the ethanol RIN prices are expected to increase strongly in order to bring ethanol prices to the energy equivalent of gasoline since the E15 blend wall is expected to be reached. The European Union should remain shy of its objective of 10% renewable fuel in the transport sector by 2020. According to the outlook, the increase in production of second generation biofuel will remain very limited and for that reason the European Union should only reach 8.6% of transport fuel by 2022.

  • Biofuel production in most developing countries serves mainly the purpose of energy independence except for Brazil, Argentina, Indonesia, Malaysia and Thailand; these will also be important exporters of ethanol or biodiesel. Brazil will also remain a large consumer of ethanol on the basis of the assumption that Petrobas will stop freezing the retail price of gasoline and also that the minimum blend requirement rises from 20% to 25% since May 2012. The consumption of ethanol by flex-fuel car owners in Brazil should therefore increase significantly as a result of the anticipated growing crude oil price. The cultivation of non-edible crops to produce biofuels is expected to remain on a project or small-scale level in most developing countries.