Burning Food

Biofuels for automotive purposes, which is the the most common use, are produced mainly in two different ways to get either ethanol or biodiesel. To produce ethanol, the process is first to grow crops, and then use yeast fermentation to make the final product. Alternatively, biodiesel can be made by first growing plants that naturally produce oils, and then reduce their viscosity. These oils can be burned directly in a diesel engine or be chemically processed to produce more refined biodiesel.

The International Energy Agency project world supply of automotive biofuels to rise to 1.8 mb/d by  2012, which is roughly double the 0.9 mb/d produced in 2006. The forecast is relatively conservative considering the multiple policy statements and biofuels production targets. In comparison, total world oil demand is forecasted at close to 96 mb/d in 2012, so biofuels will only be a small supplement to conventional fossil fuels.

Production of biofuels has for the last years been one of the contributing factors to increased demand and rising prices of feedstocks such as corn, sugar, soybeans, maize and palm oils. The pursuit for more CO2 friendly energy sources has put heavy preasure on the world agricultural resources as biofuel production is competing with food production over the world´s arable acreage. Biofuel production is highly areal-intensive compared to the amount of energy one get out of the finished products. As an example a Norwegian biofuel factory is setting up this year with a planned production of about 100,000 tons of biodiesel yearly, with soybeans from Brazil as input. Aproximately 265,000 hectars, or 0.7% of Brazil´s total agriproduct area will be needed to grow sufficient volumes for the production. The final biofuel products from this production will cover only 0.9% of the yearly Norwegian oil consumption. This means that to cover total Norwegian oil consumption with biofuel, close to 80% of the total Brazilean agriproduct area would be needed to grow soybeans.  

While biofuel is considered by many as a means of reducing emissions and increasing energy security by providing an alternative to fossil fuels, Nobel Laureate Paul Crutzen last year published findings that some biofuels contribute more to global warming than the fossil fuels they replace.

Whereas the the environmental effects of biofuel production can be discussed, there are some clearly negative socio-ecomical effects of using what could have been food, to fuel our cars. Inreased prices on agriproducts due to high demand for biofuels will cause scarcity of food for the poorest countries. I think we will soon see some policy changes towards biofuels if the richer nations are going to save the environment at the expense of poorer nations´ hunger.

From a shipping standpoint, increased grain demand leading to increased world trade will be beneficial for the shipping industry. Important for shipping is a likely shift in demand from different areas, which could have substantial leverage on tonne-miles if North America and the River Plate area are to cover up for troubled Australia. Increased demand for grain for production of biofuel will also add to tonnage demand. Input for biofuel production are both dry and liquid commodities, but will probably have a greater impact on dry bulk shipping. World production of grain will have to increase as populations are growing and consuming more. Additional production will to a large extent take place at areas far away from important consuming areas. In conclusion, we can say that increased demand for grain and biofuel is good for dry bulk shipping and for chemical carriers engaged in vegoil trades.