Transportation Energy

Biodiesel

Biodiesel fuel is an alternative to petroleum-based diesel fuel that is manufactured from vegetable oils, animal fat, or recycled restaurant grease. Biodiesel can be used in its pure form with certain engine modifications and blended with petroleum diesel in unmodified engines. Biodiesel from grease is closer to being cost-competitive with petroleum diesel than is biodiesel from soybean oil, but the available supply of grease may limit its use in biodiesel production.

• Consumption:  In the U.S., the market for biodiesel is growing at a dramatic rate. Biodiesel consumption in the U.S. grew from 25 million gallons per year in 2004 to 78 million gallons in 2005.

• Supply:  U.S. biodiesel production has increased from less than 1 million gallons in 1999 to about 75 million gallons in 2005, equivalent to about 5,000 barrels of oil per day and less than 1% of total diesel fuels used for transportation. Biodiesel production in the U.S. is expected to reach 300 million gallons by the end of 2006, and to reach approximately 750 million gallons per year in 2007. The Energy Information Association projects that biodiesel production could reach the equivalent of 2,000 barrels of oil per day by 2030.

• Legislative Initiatives:  The American Jobs Creation Act of 2004 (P.L. 108-357) created an excise tax credit for biodiesel fuel blending. The credit is $1.00 per gallon of biodiesel used. The Energy Policy Act of 2005 extended this credit through the end of 2008. It also allows for biodiesel production to contribute to achievement of the Renewable Fuel Standard.