Energy Diversification Economic aspects of biofuels

Although more a national security objective than an economic issue, a key strategic objective associated with biofuels is the achievement of greater energy security through a diversified energy portfolio. Indeed, reduced reliance on imported oil was the main driver behind the earliest experiences with biofuels in Brazil and the US.

The volatility of world oil prices, uneven global distribution of oil supplies, uncompetitive structures governing the oil supply (i.e. the OPEC cartel) and a heavy dependence on imported fuels are all factors that leave many countries vulnerable to disruption of supply. This may impose serious energy security risks, in particular to those countries that are heavily dependent on energy imports. In 2000, oil imports of OECD countries accounted for 52 per cent of their energy requirements, but this is expected to rise to 76 per cent by 2020. Almost all least developed countries are oil importers. Crude oil imports to ACP countries were expected to increase to 72 per cent of their requirements in 2005. Non-OECD countries share 41 per cent of the world oil consumption. Oil supplies, on the other hand, are very unevenly distributed and concentrated in few countries (75 per cent in the Middle East) and are governed by uncompetitive structures.

The above factors, together with the current high oil prices; the future oil demand of new large economies such as China and India, causing uncertainty about future oil availability; the recent dispute between Russia and Ukraine over the price of natural gas (which put EU gas supplies at risk), suggest that the energy security issue will become a higher priority on government agendas.See more about biodiesel project.