Biofuels producers hit back at Opec over oil price

Terry Macalister, The Guardian 17 Jul 08;

The global biofuels sector has launched a ferocious attack on the Opec oil cartel by accusing it of deliberately "misleading" the public about who is responsible for soaring fuel prices.

An open letter to Chakib Khelil, president of Opec, from the main biofuel organisations in Europe, North America and Brazil accuses him of providing self-serving explanations by claiming that 40% of the $140-a-barrel crude price results from the intrusion of bioethanol into the market.

"Since you, as head of Opec, provide no explanation for what in our view constitutes a self-serving and misleading statement that goes counter to any independent analysis of the fuels market today, one can only conclude that Opec views competition with biofuels as a direct threat," says the letter signed by the European Bioethanol Fuel Association, the Renewable Fuels Association in the US, the Canadian Renewable Fuels Association and the Brazilian sugar-cane producers of Unica.

The organisations point instead to a recent piece of research from the investment bank Merrill Lynch suggesting that biofuels push crude prices 15% lower than they otherwise would be. They note that petrol prices in Brazil have not risen in two years because of competition from sugar cane-derived ethanol.

Last month Opec warned western countries that their efforts to develop biofuels as an alternative energy source to combat climate change risked driving the price of oil "through the roof".

Abdalla el-Badri, secretary general of Opec, said the cartel was considering cutting its investment in new oil production in response to moves by the developed world to use more biofuels.

The biofuels industry says Opec members are heading for revenues of $1.2tn (£600bn) this year as a result of the "exorbitant" price of oil. "We realise that biofuels may be reducing your windfall profits," said the letter, which was published as a whole-page advert in the FT. "But, perhaps, the time for Opec to face some competition has finally arrived."