I suppose it was bound to happen sometime: the Olympia, Washington Olympian is reporting that biodiesel is now cheaper than regular diesel.
Until now, biodiesel consumers have had to pay a premium at the pump; making highway fuel from vegetable oil was more costly than pumping it out of the ground. But thanks to rapidly rising crude prices, that’s no longer true.
Of course, biodiesel still gets a $1 per gallon federal tax credit. Without that credit, biodiesel would be no bargain, even with petroleum-based diesel topping $3 per gallon.
But as biodiesel proponents point out, the subsidy may be just a way of leveling the playing field. Petroleum benefits from hidden subsidies, ranging from favorable tax treatment for domestic production, environmental costs of pollution that are borne by society at large rather than oil consumers, and military and security costs.
It’s hard to pin down the precise value of hidden petroleum subsidies, so it’s not completely clear how the $1 subsidy for biodiesel compares. (See here for a somewhat out-of-date look at petroleum subsidies.)
Subsidies aside, this still seems like a significant landmark. Of course, I expect that if diesel prices rise, the price of biodiesel will follow suit. Once truck fleets start thinking of biodiesel as a bargain, they’ll start blending more in with the regular diesel; as biodiesel demand rises, so will the price.
