Alternative fuels come with added costs

Jeff Tyler Nov 8, 2007

Alternative fuels come with added costs

Jeff Tyler Nov 8, 2007


KAI RYSSDAL: Oil traders took a breather today. Crude tumbled almost a buck to 95-53 a barrel. Or, by another measurement about $665 a ton. Crude’s not the only oil near record highs. Palm oil traded for about $900 a ton in Malaysia today. Prices for other vegetable oils are sizzling, too. Marketplace’s Jeff Tyler reports hot commodities are cooking up some controversy.

JEFF TYLER: About a third of the world’s vegetable oil comes from palm trees. For the last decade, palm oil has traded for around $450 a ton. Now it sells for more than double.

LEN STEINER: What’s behind it is a growing bio-diesel industry, which is doing to vegetable oils what ethanol did to corn.

Len Steiner is an economic consultant to the food industry.

STEINER: In the past, it was only for human consumption, and now it’s for running motors.

In Hamburg, Germany, Thomas Mielke agrees. He’s director of Oil World, which studies international agriculture.

THOMAS MIELKE: The new demand from the bio-diesel industry has come so quickly that the production worldwide could not adapt quickly enough.

Mielke says the same goes for corn, sunflower and canola oils.

MIELKE: Record highs. All over the place. For the same reason, bio-fuels.

Eventually, consumers will pay the price in higher costs for margarine, salad dressing and candy bars. Not such a big deal for U-S consumers. But then again, Len Steiner says we Americans only spend about 7 percent of our income on food.

STEINER: When you get into a place like Bangladesh, that may be using 75 percent of their income for food, and all of a sudden you have something that goes up 35 percent, you’ve got to decide who’s going to eat in your family.

Even if new palm trees were planted today, it would take about five years before you could harvest the oil.

I’m Jeff Tyler for Marketplace.

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