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Biofuels are driving up already high vegetable oil prices

Biofuels are far more responsible for high vegetable oil prices than Russia’s invasion of Ukraine, said agricultural economist Aaron Smith of the University of California-Davis, and industry demand will push prices higher. Ukraine and Russia produce more than half of the sunflower oil in the world but the oil accounts for only 10% of global production of vegetable oils.

Government policies such as the $1-a-gallon tax credit for biomass-based diesel and mandates such as the federal Renewable Fuel Standard and California’s low-carbon fuel standard encourage use of biomass-based diesel, wrote Smith in the “Monthly Harvest” publication of the think tank American Enterprise Institute. Worldwide, 16% of vegetable oil is used in making biomass-based diesel. In the United States, the figure is 30%.

“In the past year, several large renewable diesel projects have been announced and begun construction. If theses projects are completed, U.S. renewable diesel production capacity would be 10 times higher in 2024 than it was in 2020,” said the AEI article. The projects would require more soybean oil than is now produced in the United States, an unlikely outcome but an illustration of the large demand for vegetable oil for biofuels.

The renewable diesel industry is expanding rapidly, perhaps in anticipation of expanded biofuel requirements at the state and federal level, said Smith. “These actions will increase the industrial demand for vegetable oils, raise prices even further and increase the cost of food throughout the world, both for wealthy Malibu households and poor families in sub-Saharan Africa.”

Produced with FERN, non-profit reporting on food, agriculture, and environmental health.
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