Biofuel industry lashes out at "misleading" OPEC claims

The global biofuels industry yesterday responded angrily to suggestions from the Opec oil cartel that it is a major contributor to the recent increases in oil prices.

An open letter to Opec president Chakib Khelil signed by biofuel trade bodies from Europe, the US, Canada and Brazil argues that his recent claim that "the intrusion of bioethanol in the market" is responsible for 40 per cent of the rise in world oil prices is both "self-serving and misleading".

The letter, which appeared as a full page advert in the Financial Times, goes on to claim that independent analysis has shown that far from driving up oil prices the emergence of the biofuel industry had reduced demand for oil and helped keep prices lower than they would otherwise have been.

"The growing volume of biofuels in the global fuels market is helping to keep world oil and gasoline prices lower than OPEC may like," the letter claims. "A recent Merrill Lynch analysis shows that biofuels keep world oil prices 15 per cent lower than they otherwise would be."

It also claims that in Brazil, gasoline prices have not gone up in two years because of competition from ethanol, while in the US gasoline prices could be $0.50 higher or more per gallon without biofuels.

The biofuel associations dismiss Opec's suggestion that concern among oil suppliers that a shift towards biofuels is undermining the case for investment in new capacity and consequently driving up prices, insisting that a weak dollar, geopolitical concerns, increased demand in the developing world and fears over supply scarcity lie at the root of high oil prices.

The letter accuses Khelil of attempting to vilify the biofuels in order to stifle a source of competition.

"Efforts to obfuscate and mislead the public about biofuels will do nothing to alleviate the energy crisis gripping the globe," it concludes. "We realise that biofuels may be reducing your windfall profits. But, perhaps, the time for OPEC to face some competition has finally arrived."