Falling gas prices and economic downturn hurt alternative fuel production, especially biodiesel

Two-thirds of U. S. biodiesel production capacity, once counted on to reduce the nation's dependence on foreign oil, is sitting unused, according to the National Biodiesel Board. Ann Davis and Russell Gold of The Wall Street Journal report that the global credit crisis, a glut of capacity, lower oil prices and delayed government rules changes on fuel mixes are threatening the viability of biodiesel and next-generation fuels derived from feedstock other than food. (Journal chart)

Davis and Gold report GreenHunter Energy Inc. has halted production and may have to sell its year-old Houston biodiesel plant. Dozens of other plants have also stopped production because biodiesel production is no longer economical, the Journal reports. The Environmental Protection Agency is several months late in issuing regulations for blending of biodiesel with regular diesel fuel.

Biodiesel isn't the only biofuel in the lurch. A federal jury recently found that Cello Energy, which was supposed to account for 70 percent of the U. S. cellulosic biofuel supply, had defrauded investors. Ethanol is also hurting, but is somewhat insulated by a federal subsidy.

A 2007 law calls for the U.S. to blend 36 billion gallons of biofuel into its fuel supply by 2022, increasing biofuel's share of the domestic liquid fuel market from 5 percent to 16 percent. "The industry is already falling behind its targets," Davis and Gold report. (Read more)