Biodiesel:
Evaluating the Risk of Oil Shortage and the
Contribution of Brazil to the Global Supply
Thomas Brieu
Edmilson Moutinho-dos-Santos
Virginia Parente
University of Sao Paulo – USP Energy Program
Instituto de Eletrotécnica e Energia – IEE USA IAEE – September, 2007
Objective
The objective of that study is to analyse Brazil’s
potential role as a leading global supplier of
biofuels taking into consideration issues such as:
■
fuel security versus food security
■
time for developing new crops
Hypothesis
The growing demand for biodiesel around
the world will provide a substantial boost to
the price of vegetable oil and raise the
question of fuel security over food security
■
Already happening with corn and sugar in the
case of ethanol
Context
The most likely candidates – with available land, mature oilseed
industry, and that have the potential to meet the short-term and skyrocketing global demand for biofuel – are Canada and Brazil
These countries are believed to still have large areas of available
and productive land that could quickly be allocated to biofuel production
Indeed, in the case of Brazil, the remaining arable lands are
Hypothesis
The growing demand for biodiesel around
the world will provide a substantial boost to
the price of vegetable oil and raise the
question of fuel security over food security
■
Already happening with corn and sugar in the
case of ethanol
Constraints and implications:
■
However, the potential of higher prices to boost
production is limited by structural constraints
■
Huge redistribution of land uses seems inevitable
but will be difficult to achieve in the short term.
■
Therefore, policies aiming to promote aggressive
production of biofuels may focus on the
multidimensional competition for land
Constraints and implications
■
High vegetable oil prices will stimulate the production of high oil
content oilseeds worldwide
■
Yet this solution can only be developed in the medium term
■
Developing new crops of palm trees or jatropha takes a
minimum of 3-4 years from seeding to the first harvest, and 8-
10 years to achieve full maturity
Æ Only by speeding up major technological
breakthroughs may these constraints can be
Biodiesel: connects many different markets
CO2 MARKET PETROLEUM FOOD PROTEIN MEAL & MEATLAND USES WATER
GLYCERINE PAINTING & LUBRIFICANT FARMACEU-TICAL & COSMETICS PUBLIC POLICIES & PUBLIC BUDGET ENVIRON-MENTAL ISSUES BIODIESEL VEGETABL E OIL
Evolution of the world production for each kind of oil
2002 to 2007 Palm oil 25,382 28,187 30,918 33,590 35,160 37,600 48% Soy oil 29,855 31,234 30,728 33,554 34,822 36,640 23% Canola 13,317 12,670 14,917 16,061 17,665 18,560 39% Sunflower 7,596 8,920 9,415 9,733 10,540 10,850 43% Cotton 4,221 3,991 4,414 5,010 4,904 5,000 18% Peanut 5,180 4,516 4,747 4,507 4,551 4,520 -13% Palmist 3,046 3,346 3,577 3,953 4,112 4,350 43% Coconut 3,144 3,297 3,063 3,253 3,283 3,330 6% Olive oil 2,730 2,914 3,064 2,918 2,662 3,140 15% Corn oil 2,016 2,017 2,025 2,124 2,194 2,295 14% Castor oil 437 429 497 547 543 537 23% Total 96,924 101,521 107,365 115,250 120,436 126,822 31% Average Annual Growth 4.74% 5.76% 7.34% 4.50% 5.30% 5.5% 2006 2007 2002 2003 2004 2005 (Mt tons)Recent years have seen an already very high growth in production, without taking into account the additional demand for biodiesel. There are serious questions about the capacity of world oil supply to grow even more to meet the biodiesel “demand shock” without compromising the demand for food.
Constraints regarding soybean
■
In the case of soybean: it requires anticipating the
supply/demand of biodiesel from an oilseed that is
primarily used to produce protein meal
Æ Indeed, four tons of protein meal are produced for each ton of soy oil
Æ Soybean meal leads almost 3/4 of the protein meal market worldwide
■
Soy oil supply is therefore a by-product of the demand for
Biodiesel demand perspectives in Mt
(million tons)
Source: USB, 2006.
Mkt power shift from DD to SS. The vegetable oil market went from a demand driven market to a supply driven market in 2006
Final remarks: DD versus SS
■
Practically all the sources that refer to demand perspectives
are more optimistic than those that refer to supply ones
■
The increase/antecipation of biodiesel demand is not always
concerned with supply restrictions
■
Policies aiming to promote rapid growth in the global
biodiesel demand assume that the supply will always be
generously elastic to any additional demand
Final remarks: Brazilian soybean contribution
■ Regarding soybean from Brazil, if the potential doesn’t seem to
boost supply in the short term
■ Even using existing available arable land to expand soybean
production, the rhythm of this expansion may not be enough to supply simultaneously:
■ the endogenous growth of the food market and ■ the emergent demand for biodiesel
■ On the other hand, soybean supplies are limited by the protein
meal market as animal feed:
Than
k yo
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Thomas Brieu
–
tbrieu@iee.usp.br
Edmilson Moutinho-dos-Santos
–
edsantos@iee.usp.br
Virginia Parente
–
vparente@iee.usp.br
University of Sao Paulo – USP
Energy Program
OPORTUNIDADES DO BIODIESEL
Econômicas
6
Fortalecimento e dinamização da economia local.6
Desaceleração do esgotamento das reservas de combustíveis fósseis.6
Redução do nível de dependência externa do país por diesel.6
Possibilidade de exportação.6
Grande demanda do diesel no mercado interno.MERCADO DO DIESEL NO BRASIL - Produção: 34,51 milhões de m3 - Volume importado: 3,81 mihões de m3 de diesel - Venda - mercado interno: 36,80 milhões de m3 de diesel Fonte: ANP (2003)