Merrill Lynch commodity strategist Francisco Blanch says that oil and gasoline prices would be about 15% higher if biofuel producers weren’t increasing their output. That would put oil at more than $115 a barrel, instead of the current price of around $102. U.S. gasoline prices would have surged to more than $3.70 a gallon, compared with an average of a little more than $3.25 today. Biofuels are playing “a critical role” in satisfying world demand, says Fatih Birol, chief economist of the Paris-based International Energy Agency. Without them, “it would be much more difficult to balance global oil markets,” he said.
Source: Wall Street Journal, March 24, 2008
With oil around $120, the 15% increase in oil price discussed above should the anti-biofuel propaganda prevail and biofuel production be reduced would carry us to $138. Apparently, the anti-biofuel crowd, with Saudi Minister of Petroleum and Mineral Resources Ali Al-Naimi taking the lead, wouldn’t mind that outcome.