Arthur D. Little is undertaking a study on the Sustainability of Transportation Biofuels aiming to answer the question “given dependency on high oil prices and political support, are transportation biofuels economically sustainable?"
Quoting from their press release:
Despite the current support, there are uncertainties regarding the long-term sustainability of biofuel technologies and applications. This is due to the fact that most biofuels are cost competitive only in times of high oil prices. Also, the competition between fuel crop and food crop needs and the impact on biodiversity may lead to withdrawal or reduction of government support in the long-term. Finally, there is uncertainty regarding those who will be the active players in the value chain. For instance, will there continue to be on-off joint ventures supported by private equity, or will the market be dominated by energy majors and others?
“The biofuel market is thriving in countries which have the most favorable political incentives and availability of cheap feedstocks. But long term survival of the various biofuel options is far from clear, as virtually all are dependent on government support and/or high oil prices,” comments Roger Hill, Head of Arthur D. Littles Global Energy Practice.
Their biofuels website gives some preliminary answers regarding the profit potential. As can be seen from their chart above, only sugar cane ethanol from Brazil is profitable at a $40/bbl crude oil price, and U.S. corn oil is profitable at a slightly higher price of crude. The other supplies require a much higher oil price or substantial subsidies. At this point (in the study) cellulosic ethanol and biobutanol apparently are not considered. Factors other than cost will obviously be studied.