After oil prices reached record highs mid last week, Reuters reported the price surge boosted shares in ethanol companies in the US.
For example, VeraSun Energy shares jumped 62% since lows mid last year and US BioEnergy Corp shares were up nearly 97%. Archer Daniels Midland shares, the second largest US ethanol producer, were up nearly 50% from its year low last January.
The Energy Independence and Security Act of 2007 passed by the US Government late last year to increase the supply of renewable fuels for vehicles and require car makers to improve fuel efficiency standards by 40% by 2020 was also put forward by Reuters as a factor driving market interest in biofuels.
Agri Energy CEO Peter Anderton told PNN's sister publication EnvironmentalManagementNews.net he expected the price of oil would increase further to a possible US$120-150 per barrel ($138-172) within coming months.
The ethanol industry has been subject to setbacks in the last year, with high feedstock prices causing production disruption.
Agri Energy put its plans for ethanol plants in Australia on hold last year and Anderton said high wheat prices were still putting pressure on the local industry.
However, Anderton remained confident the industry would attract much needed investment in the future.
While the industry is still in its infancy and market movements are difficult to predict, he expects an eventual downturn in wheat prices when more producers move into the market, creating an oversupply of wheat. This will drive additional investment in ethanol production.
While these developments are expected to boost demand for renewable fuels, Anderton said a mandate on E85 ethanol (a fuel blend containing 85% ethanol and 15% gasoline) is the most vital factor that could influence the growth of renewable fuels in Australia.
Meanwhile, the International Energy Agency (IEA) said recent oil price increases serve as a reminder that consumers and governments have to implement measures that improve energy efficiency.
"Such measures are available now and provide the most effective short term response," the IEA said in a statement.
