Whenever the price of fossil fuel goes up, the first question that comes to mind to many diesel users considering the switch to using bio diesel for a cost perspective is – why has the price of bio diesel also increased?

The answer to this legitimate question is market forces – not local market forces only – but those on the international and world stage.

As the world becomes more sensible to the issue of global warming, and to the proven negative effect of diesel and other fossil fuels on our climate and the general state of health, the demand for alternative cleaner and sustainable energy sources increases. Bio-diesel is such a sustainable and cleaner source of energy that it has to be integrated into a country’s energy strategy.

In line with this increase in demand, the feedstocks, which are the backbone or prime material in the production of bio-diesel, react to the higher demand and this in turn is reflected in the price of that prime material.

If one were to quote a practical example with a local dimension, EORC – Malta’s leading bio-diesel-producing company with sales surpassing two million litres annually – is today paying more than double the price for the used cooking oil and fats that are retrieved from the local market.

It is good to note that the local and indigenous bio-diesel industry in Malta retrieves and mops up 1.4 million litres of used oils and fats which we Maltese generate in our day-to-day life and which would otherwise have found their way into our waste stream at a high intrinsic cost but also at a very high environmental cost.

This higher cost for locally-generated waste reflects current market forces whereby with more bio-diesel producers on the local scene and with a double-digit growth pattern in turnover on an annual basis, supply comes under pressure – which in turn is then reflected in its price, a logical reaction and micro-economic reaction to demand and supply.

When the local bio-diesel industry sources its feedstock from overseas to supplement the feedstock sourced locally so as to meet local demand, the buying-in price comes at e675 per metric tonne – this same feedstock sourced from the same person used to sell at e365 per metric tonne 12 months ago. This is a result caused by all countries, but especially EU member states, that have applied a mandatory percentage inclusion of bio-diesel in the diesel mix sold across the board, thus increasing demand for bio-diesel, and hence, its feedstock. This pressure on feedstock will increase as all EU member states come in line with the agreed mandatory targets laid down for 2010 and 2020.

At this stage it is good to highlight the fact that all of this has nothing to do with the escalating prices of wheat and other staple commodities in that bio-diesel is produced from vegetable oils and fats and in Malta’s specific case these are used oils and fats, meaning we are converting a waste material into a source of energy using some creative chemistry along the way.

In fact bio fuels in general have a marginal impact on food prices in that only three per cent of the world demand for grains goes for the production of bio fuels – please note bio fuels and not bio-diesel – as has already said, bio-diesel is produced from vegetable oils, not maize.

So the bottom line is that while the price of crude oil, which is the prime material in the production of fossil fuels and diesel, has escalated to around $40 per barrel – and we probably have yet to see further increases in the price of crude due to the geopolitical and weather patterns (the hurricane season in oil-producing regions such as the Gulf of Mexico is around the corner) – so too the price of the feedstocks servicing the bio diesel industry increase due to market forces of demand and supply. Hence the sympathetic movement and synergy in the pricing of diesel vs bio diesel.

Having said all this, the fact remains that bio-diesel is still e0.073 cheaper in Malta than diesel – which is some 6.6 per cent – and consumption per kilometre is around five per cent less, thus giving a net gain per litre of about 11 per cent.