26/02/2008 (The Edge Daily), Kuala Lumpur - The current prices of feedstocks were too high to make biodiesel's production cost at a competitive level, says Dutch cooperative bank Rabobank International in the Palm Oil Conference 2008 held here on Feb 26.

The fact remains that the cost of biodiesel is very sensitive to fluctuations in the prices of feedstock such as crude palm oil (CPO) as the latter accounted for the main bulk of the total production cost, elaborates Thomas Lee Bauer, Rabobank's head of strategic advisory and research of Southeast Asia food and agribusiness.

It is worth noting that on Feb 25, CPO futures closed at a record high of RM3,866 per tonne. The uptrend of CPO prices doesn't seem to stop due to the persistent high prices of crude oil and the fact that government is giving subsidies and tax incentives to further develop the biodiesel sector, says Lee Bauer during the conference.

“However, the emergence of alternative feedstocks and new alternative fuel such as Jatropha, cellulosic ethanol could compete with palm oil biodiesel,” he said.

Thomas said the economic slowdown and change in Organisation of the Petroleum Exporting Countries (Opec) policy could cause major correction in crude oil prices and this could lead to a decline in CPO prices.

Meanwhile, non-government organisations (NGOs) with their concerns on the sustainability of biodiesel production would prevent the palm oil biodiesel industry from taking off, he added. That the European Union (EU) could also impose trade restrictions on biodiesel may be another deterring factor, he says.