What Factors Affect the Price of Biodiesel?

The price of biodiesel is affected not only by supply and demand but also the cost of production and the source of biomass. Major influences come from the agriculture industry and the petroleum market, and the primary limiting factor is scale. For a home-based operation, the savings easily outweigh the costs, but an industrial-scale production facility might operate for several years before clearing a profit, because of the increased investment and risk associated with developing and promoting an alternative energy from scratch.

Biodiesel can be produced from algae biomass, recycled cooking oil and soybean oil. Algae holds the potential to overcome the problem of scale but becomes profitable only when the cost of petroleum is high. Soybean oil has been more widely developed because these crops are already produced on a large enough scale to meet demand.

The price of biodiesel is determined by which blend is offered. Blends are indicated by the percentage that is biodiesel, such as B10 to represent a blend of 10 percent biodiesel and 90 percent regular diesel. Most gas stations offer a B5, B10, or B20 blend to keep the price of biodiesel low. Some stations may offer the pure form, B100, but the price of biodiesel B100 is higher, naturally.

There might also be seasonal factors involved in growing, producing and distributing biodiesel which can drive the price of biodiesel higher than regular diesel. Similar price fluctuations occur in the crude oil market when the growing, production or distribution processes are interrupted for any reason. The future of biodiesel will greatly depend on the ability to produce the alternative fuel on a functional scale, earning it the same potential as petroleum has for energy production.

Unlike petroleum, the price of biodiesel reflects the value people place on the environment. Biodiesel use promotes clean air, clean water and renewable resources. The demand for clean fuel has grown because many businesses have recognized the advantages and incentives associated with it. Biodeisel offers a petroleum-free fuel source that can be used in diesel engines with ease while increasing performance and extending the life of the engine.

Many home-based biofuel operations have sprung up as part of the "green revolution." Individuals can obtain used cooking oil from local restaurants. This oil can be processed into biodiesel in a kitchen, basement or garage without any fancy equipment or special knowledge. Although not for everyone, the effort one puts into brewing his or her own fuel can translate into big savings and sense of self-sufficiency.

Fuel-grade biodiesel typically is prepared using a process known as transesterification. This process encompasses strict industry requirements. Biodiesel that is produced using this method is the only biofuel that is legal as a motor fuel in some jurisdictions.