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The biofuels market is driven by spiralling petroleum prices, limited resources of fossil fuels and quest for alternate renewable fuels with lower emissions. The impetus for the biofuels market is the commitment to adhere to Kyoto Protocol under the United Nations Framework Convention on Climate Change [UNFCCC] by the developed countries for emission reductions in a phased manner.

As forecast by International Energy analysts, world oil demand is estimated to increase by 47% to 118 million barrels per day by 2030 from the present 80 -90 million barrels per day [2003]. India and China will account for 43% increase in global oil consumption and an average economic growth rate of 5.5% per annum till 2030 will lead to 3% annual increase in demand for oil in Asian non-OECD (Organization for Economic Co-operation and Development- OECD) countries. Saudi Arabia’s oil reserves are highest at 264.3 billion barrels followed by Canada and Iran. India’s reserves are pegged at 5.8 billion barrels.

Though newer oil and gas reserves are being discovered the world over, supplies are forecast to fall short due to the increasing demand.

Fossil fuels cater to almost 80% of the world’s energy requirements and have a significant influence on the global economy. A country’s Gross Domestic Product [GDP] can raise or decline under its influence.

World oil supply reached 85.3 million barrels per day [mb/d] in October 2006 and the demand is expected to average 84.5 mb/d this year and 85.9 mb/d the next. In view of the projected demand and supply shortage coupled with the raising prices, biofuels as alternate renewable fuels are gaining importance.

Biofuels should be viewed from multi-dimensional perspective of depleting fossil fuel resources, environmental health, energy, security, agrarian economy and new avenues of gainful employment. Biofuels impact commodity markets as they generate demand for cereals and other crops, vegetable oils etc to support producer incomes and rural economies. Government can become self reliant, generate rural income and employment especially in arid regions and tribal areas.

Biofuels presently in use are biodiesel and bioethanol. Biofuels are forecast to become a major part of the energy supplies. The introduction of biofuel into the motor fuel market will be the most immediate and most efficient way to meet the obligation of the Kyoto Protocol’. The benefits in terms of sustainable environment and health have clearly sent the message globally.

Biodiesel is produced from renewable resources such as vegetable oils like palm oil, soybean oil, rape seed oil, Jatropha oil, Pongamia, castor oil, coconut oil etc. If Biodiesel is pure, or 100 percent, it is referred to as B100 or “neat” biodiesel. A biodiesel blend is pure biodiesel blended with petrodiesel. Biodiesel blends are referred to as Bxx. The xx indicates the amount of biodiesel in the blend (i.e. a B20 blend is 20 percent by volume biodiesel and 80 percent by volume petrodiesel).

Biodiesel can be used in various ratios ranging from low blends [B2 to B5] upto B20 without engine modifications, as per studies conducted by the US Departments of Agriculture and Energy. Above B20 blends require engine modifications and approval from the engine suppliers.

Biodiesel is an ethyl or methyl ester of fatty acids made from edible or non-edible oils and animal fatty acids. These can also be made from jatropha (ratanjyot), pongamia (karanja), grains, groundnut oil, soybean oil, sunflower oil, crude palm oil, rapeseed oil, used vegetable oils, sugarcane juice, molasses, cereals, cellulose biomass such as herbaceous and woody plants, agricultural and forestry residues and a large portion of municipal solid and industrial waste.

Bio-diesel is a biodegradable transportation fuel additive to diesel fuel that contributes no net carbon dioxide or sulphur to the atmosphere and low particulate emissions. Biodiesel is typically used as a fuel additive in 20%(B20) with diesel in compression ignition (diesel) engine. Biodiesel’s heat energy is similar to petroleum diesel while being safe to handle and store than petroleum diesel.

In Europe, presently the suggested blends are upto 5.75%. (B5, B2). The production of biodiesel in European Union[EU] was 3 million tonnes[2006]. The forecast demand for biodiesel as against 10.1 million tonnes of biodiesel requirement by 2010 to meet the EU target of 5.75%. In the U.S, the biodiesel production tripled from 25 million gallons in 2005 to 75 million gallons in the year 2006. The projected demand is 650 million gallons by 2015 based on an assumption of 5% blending.

As per the National Biodiesel Board [NBB], the highway diesel usage in the US was 43.2 billion gallons in 2005 and is expected to raise to 52.3 billion gallons by 2015. If a 20% blending requirement is estimated, the biodiesel requirement will be 8.64 billion gallons. The production in the year 2005 was around 75 million gallons. This translates to a biodiesel supply position of less than 1% of blending requirement.

In India, the Government of India have declared a Biodiesel Purchase Policy and are keen on encouraging non edible sources of oil for promotion of biodiesel blending.

The international biodiesel market is forecast to grow at more than 35% per year. It is also projected that Palm oil is the most effective feedstock for biodiesel production as compared to other oils. As per published information, palm oil based biodiesel will be feasible for blending with petro-diesel even when the crude oil prices range between US$ 50 to 55 per barrel.