Biofuels Keeping Gasoline Prices Lower

Francisco Blanch, a commodity specialist for Merrill Lynch, today told The Wall Street Journal that as a result of increased biofuels output, oil and gasoline prices today are about 15 percent lower than they would be otherwise. According to the story, without biofuels, oil prices today would likely be around $115 a barrel instead of around $102. Instead of an average U.S. gasoline price of $3.25 a gallon, without biofuels, the average would likely be more than $3.70 a gallon.

According to the story, global production of biofuels is rising annually by the equivalent of about 300,000 barrels of oil a day. However, the growing global demand for oil last year rose by about 900,000 barrels a day. Fatih Birol, the chief economist of the International Energy Agency, told the Journal that biofuels are playing “a critical role” in helping meet the world’s demand for energy. He said that without biofuels, “it would be much more difficult to balance global oil markets.”