As bio-diesel increases in popularity, producers are jumping on the bandwagon faster than ever. According to a new study conducted by Ralf Gubler, vice-president of SRI Consulting, all of this production is expected to lead to a glut during 2007 as new plants come online. New production facilities are being built all the time with larger and larger capacities. Overall, Gubler is pessimistic about the prospects for biodiesel, and expects consumption to peak in 2006-2007 even as more supply becomes available. That's expected to drive down prices for consumers.

According to the study, Western Europe produced three quarters of the world's biodiesel in 2005 but that's expected to drop precipitously as more fuel is produced in North America and Asia. Germany accounted for 61 percent of the world's biodiesel consumption last year followed by France and the United States. Going forward, the study expects the US to be the top market for biodiesel, with big growth coming in India and China.

It seems unlikely that biodiesel consumption will peak next year though. With petroleum gas prices always uncertain and more municipal diesel fleets starting to use biodiesel in the coming years, it seems the market will probably continue to exhibit large growth. There are also a lot of new diesel vehicles coming to market in the US in the next few years which bodes well for producers. As drivers become more aware of the real world mileage benefits of the new cleaner, quieter diesel cars and trucks, the market will probably begin to look a lot more like the European market, where diesels make up 50 percent or more of new car sales in many places. It seems likely that any biodiesel glut that will be temporary until diesel sales catch up to availability.

[Source: SRI Consulting via InsideGreenTech.com]