Analysis: Support for Biofuels in Obama’s Energy Speech Holds Promise for Green Heating Oil
On Wednesday, President Obama delivered a sweeping, 45-minute speech at Georgetown University (the full transcript is available on the Whitehouse website) in which he laid out his vision for the country’s energy future. His strong support for biofuels as a key energy source over the next decade could mean cheaper and more readily available biodiesel for heating oil dealers who sell the green fuel blended with traditional petroleum-based no. 2 oil.
In January’s State of the Union address, President Obama offered support for biofuels while also calling for a major reduction in federal subsidies for oil companies. This combination made for a mixed potential effect on heating oil: higher costs for oil companies would likely lead to higher heating oil prices but greater support for biofuels would probably make for greater quantities and lower prices of biodiesel.
In Wednesday’s speech, Obama did not mention cutting subsidies for the oil industry, but unequivocally doubled down on his support for the development and commercial production of biofuels. The president did set a goal for reducing oil consumption in the US: cutting crude oil imports by a third by 2025. The president called this objective “reasonable, achievable, and necessary.” If Obama’s plan were to move forward toward that goal, reduced consumption of crude oil, especially in the world’s top consumer, would probably drive oil prices lower.
Near the middle of his speech, Obama mentioned biofuels a total of nine times, and introduced renewable biofuels as a “substitute for oil that holds tremendous promise.” He also singled out second-generation biofuels made from non-food products, “things like switchgrass and wood chips and biomass.”
Because, as Obama noted, “Seventy percent of our petroleum consumption goes to transportation,” he focused on utilizing biofuels as vehicle fuel and did not mention their potential as a heating fuel. Nor did the president mention biodiesel by name. But his mention of biofuels to power trucks, which are almost exclusively powered by diesel fuel, signaled the inclusion of biodiesel in the broad category of renewable fuels he praised:
I’m directing the Navy and the Department of Energy and Agriculture to work with the private sector to create advanced biofuels that can power…trucks and commercial airliners.
Such collaboration between federal agencies and private sector energy innovators could mean great progress in the further development of making biodiesel from a variety of feedstocks like genetically engineered organisms, algae, and coffee grounds. Perhaps more importantly, Obama emphasized the need for a wide and efficient distribution network for biofuels:
One of the biggest problems we have with alternative energy is not just producing the energy, but also distributing it. We’ve got gas stations all around the country, so whenever you need gas you know you can fill up — it doesn’t matter where you are. Well, we’ve got to have that same kind of distribution network when it comes to our renewable energy sources so that when you are converting to a different kind of car that runs on a different kind of energy, you’re going to be able to have that same convenience. Otherwise, the market won’t work; it won’t grow.
Businesses across America are already producing biodiesel efficiently in large quantities, but the lack of distribution channels and filling stations severely limit the availability of biodiesel as a vehicle and heating fuel. Although Obama did not propose how to stimulate growth of biofuel fueling stations, he did mention that the government would “help entrepreneurs break ground for four next-generation biorefineries -– each with a capacity of more than 20 million gallons per year.”
The president’s speech left no doubt that he remains dedicated to supporting the increased production and distribution of biofuels like biodiesel, which helps increase the chances that biodiesel will become cheaper and more widely available in the coming years. That would mean lower overhead and transportation costs for heating oil dealers who supply Bioheat and other forms of biodiesel heating oil, which in turn would mean lower heating oil prices for consumers.
However, the vision outlined by the President Obama is just that: a vision. Unfortunately, the pro-biodiesel initiatives in his speech will no doubt face major political opposition in the near future that will severely diminish their scope of implementation. That’s why his biofuel initiatives will require broad support from Congress and American citizens—without one or both of those pillars, the proposed policies will be doomed to fall flat and fade into history like so many forward-looking energy initiatives before them.