Crikey

Serendipity: An OECD report finds biofuels generally cause more trouble than they’re worth just as crude closes on NYMEX at a record high of US$78.23 a barrel – and that’s despite OPEC agreeing to increase production by half a million barrels a day.

The lack of positive market reaction to OPEC’s announcement reportedly comes from a lack of confidence in the cartel’s present ability to pump more oil even when they want to. Yes, the days of the Hummer and F-1 truck as suburban runabouts really should be numbered.

Wall Street’s lack of concern about the record oil price last night is of passing bemusement, but more important is the OECD’s comprehensive bucketing of most biofuel and the duplicitous European and American politicians inhabiting that industry’s pocket.

The full report is here, courtesy of a copy failing into the Financial Times’ lap. Says the OECD:

The current push to expand the use of biofuels is creating unsustainable tensions that will disrupt markets without generating significant environmental benefits…

Governments should cease to create new mandates for biofuels and investigate ways to phase them out.

That’s not a message Australian farmers will want to hear, not because of our own fledgling and politicised industry, but because grain prices around the world are rising thanks to American farmers riding high on George Bush’s ethanol madness by switching out of food production to growing corn for heavily subsidised and mandated ethanol plants. As the OECD puts it:

The effects on farm commodity prices can already be seen today. The rapid growth of the biofuels industry is likely to keep these prices high and rising throughout at least the next decade.

Putting aside broader environmental issues, the report pours scorn on the industry’s basic greenhouse gas claims, with a couple of exceptions:

Even without taking into account carbon emissions through land-use change, among current technologies only sugarcane-to-ethanol in Brazil, ethanol produced as a by-product of cellulose production (as in Sweden and Switzerland), and manufacture of biodiesel from animal fats and used cooking oil, can substantially reduce GHG compared with gasoline and mineral diesel. The other conventional biofuels technologies typically deliver GHG reductions of less than 40% compared with their fossil-fuel alternatives. When such impacts as soil acidification, fertilizer use, biodiversity loss and toxicity of agricultural pesticides are taken into account, the overall environmental impacts of ethanol and biodiesel can very easily exceed those of petrol and mineral diesel.

Much of Australia’s present biofuels production falls into the by-product category that receives an OECD pass mark, but the industry’s ambitions here are to go further than that, assisted by the usual political suspects chasing votes in rural seats.

No, there’s no easy solution to more expensive fuel. There’s no point buying a horse – it might sneeze – and you wouldn’t want to be seen on a bike in case you’re accidentally mistaken for being one of the deluded Critical Mass.