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U.S. Biofuel Dumping

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D1 Oils share price graph

Shares in AIM-listed biofuels outfit D1 Oils plc (LSE: DOO.Lnews) are showing more sharp falls this morning after a 36% drop on Friday. The company said the influx of heavily subsidised US biodiesel is putting the entire EU green fuel industry at risk. The US government is promoting the production and use of biodiesel for transport under the so-called B99 scheme, in which producers could claim a subsidy of up to $1 per gallon if they blend 99 pct biodiesel with 1 pct mineral diesel.

Massive exports of unfairly subsidised biodiesel are now threatening the EU green fuels industry by seriously eroding the available margin on refining vegetable oils and putting at risk jobs in both Europe and in developing countries that are able to produce sustainable biodiesel from crops such as jatropha curcas. Around 1 million tonnes of B99 biodiesel are believed to have been ‘dumped’ by the US into the EU this year. About 10% of that consisted of biodiesel produced from palm plantations planted on rainforest in Southeast Asia, blended in the US and then sold on to the EU.

‘If these practices are not stopped, there will be no biodiesel refining industry in Europe,’ said Karl Watkin, founder and non-executive director of D1 Oils.

Update: Karl Watkin, founder and former chairman, has resigned from his role as non-executive director of D1. In a statement, Watkin said he is quitting out of frustration over the investment community’s inability to differentiate D1’s strategy from that of the suppliers of palm, soya and rapeseed ‘whose biodiesel products have been well documented as being environmentally unsustainable.

”I am particularly disheartened by the plethora of so-called experts on climate change who fail to distinguish between jatropha and other non-sustainable biodiesel feedstocks.

‘This lack of differentiation, combined with the London Stock Exchange’s failure to address both the liquidity problems of AIM and the impact of shorting of illiquid stocks, have conspired to erode the value of D1″.

D1 Oils has teamed up with UK oil giant BP PLC for a $160 million biodiesel project that uses jatropha, an inedible oilseed bearing tree, as a feedstock. The joint venture, called D1-BP Fuel Crops Ltd, intends to plant 1 million hectares of jatropha in its first four years. Production is expected to start next year. D1 has started a consultation process with employees on the future of its Middlesbrough and Bromborough sites, as part of a review of its downstream refining and trading operations.

‘Imports of heavily subsidised biodiesel have eroded margins to the point where we have no choice but to consider how to reduce operating costs. We are taking this action to manage the business proactively in a difficult market,’ chief executive Elliott Mannis said.

The distortion effect of subsidies is magnified by EU targets specifying that 2.5% of all fuel sold from pumps must be obtained from renewable sources. One tonne of B99 from the US costs about $1200, while buying soya to produce your own costs $1400, with another $150 for processing costs. You don’t have to be a rocket scientist to see where the biofuel to satisfy our renewables obligations will come from.

D1 is a company that’s ticking all the right boxes in terms of sustainability, producing biodiesel from a non-food plant that they are planting in marginal and non-agricultural land in developing countries round the world. They are being put under severe pressure by market distortions caused by US subsidies for biodiesel, wherever it comes from: American corn, rainforest palm oil, who cares? It does make you wonder, though, what the US government thinks about their subsidised oil being exported, rather than going to meet domestic biofuel targets. Or is the US economy in such a desperate state that they’ll export anything for foreign currency?

Perhaps the UK should consider ‘tuning’ its tax rebates on biofuels to exclude these imports. I feel another trade war coming on.


Written by Pete Smith

March 10, 2008 at 11:10 am

3 Responses

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  1. Dear Sir,

    The logic is not there.

    Jatropha oil is supposed to be cheaper than palm oil by at least 30%. So there is no reason why someone cannot ship jatropha biodiesel to the USA and make a B-99 with jatropha oil and enjoy the same competitive advantages.

    In addition, the US subsidy will finish in 2008.

    There will be no more excuse for bad business vision and management.

    Best regards



    March 10, 2008 at 1:09 pm

  2. […] US Biofuel Dumping By Pete Smith D1 Oils has teamed up with UK oil giant BP PLC for a $160 million biodiesel project that uses jatropha, an inedible oilseed bearing tree, as a feedstock. The joint venture, called D1-BP Fuel Crops Ltd, intends to plant 1 mln hectares of … Change Alley – Tags: jatropha […]

    Jatropha News

    March 11, 2008 at 6:01 am

  3. This makes me very angry. Why do we have this big global trade organisations like the WTO etc? When it comes down to it, the US seem to be able to totally ruin the developing worlds chance of earning a fair wage for their products. Who is doing anything about it thats what I want to know? I have emailed my MEP and MP but I don’t expect a miracle. Where is democracy. How do you get a voice?

    Friends of the Earth seem to think D1 is not so great. But then I don’t think they value the lives of people in the developing world very highly. Or the stability that this encourages.

    Matt Wilkinson

    March 11, 2008 at 9:05 pm

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