Monday October 4, 4:59 PM - NEW DELHI (Dow Jones)--An expected rise inthe use of bio fuels around the world may lead to a rise in the demand forand eventually the prices of vegetable oils in the next several years, anedible oil industry analyst told Dow Jones Newswires in a recentinterview.

"A large number of countries are investing in bio-diesel technology. Thisinvestment will have implications for the demand and prices of vegetableoils in the medium and long term, though not necessarily in theshort-term," said Thomas Mielke, editor-in-chief of Oil World, publishedfrom Hamburg, Germany.

"The European Union member nations are expected to have a productioncapacity of around 2.2 million-2.3 million tons of bio-diesel by the endof this calendar year," Mielke said, adding the European Union is in thevanguard of using bio-diesel technology.

The trend in crude prices will also determine how fast the demand forbio-diesel rises, he said.

The demand for bio-diesel seems to be much higher this year than in thelast two years following the sharp rally in fuel oil prices this year,Mielke said.

Crude oil futures were just shy of $50 a barrel Monday, amid continuingconcerns about a slowdown in oil and gas operations in the U.S. GulfCoast.

November light sweet crude futures on the New York Mercantile Exchangewere at $49.66/bbl at 0645 GMT, down 46 cents in light Access electronictrade. The contract touched a high of $50.47/bbl Sept. 28

While some countries are now experimenting with running vehicles entirelyon bio-diesel, others such as France are running vehicles on a mixture of2%-3% vegetable oils and 97% diesel, Mielke said.

Bio-diesel can be made from a variety of sources, including animal fatsand vegetable oils derived from crops such as soybeans, canola, corn andsunflowers.

It can also be derived from used vegetable oil, left over after cooking.

Mielke said the growing popularity of bio-diesel may have demand andsupply implications for vegetable oils in the coming few years.

"If supply of vegetable oil remains inflexible as demand from thebio-diesel industry rises, edible oil prices will rise, which in turn mayincrease production of oilseeds," said Mielke.

He said positive fallout from an increase in bio-diesel demand could be anincrease in the global acreage under oilseeds planting.

"Areas where productivity is very low and places which are quite remoteand far from ports may suddenly find it lucrative enough to growoilseeds," said Mielke.

However, in the short term, bio-diesel demand won't have much impact onedible oil prices, he said.

In the next few months, the market will look at other factors such as thesize of the U.S. and South American soybean crop and palm oil output inIndonesia and Malaysia, for getting its price triggers, Mielke said.