Tuesday, April 5, 2011

Biofuels Huge Opportunity for Oil Companies, But Challenges Abound

Oil companies face impingement upon their traditional sphere of influence and challenges to grow the alternative energy side of their businesses, according to Accenture, which recently tracked the race for leadership in alternative fuels and technology between the US and China. According to the report, "Biofuels is the area that makes most sense for oil companies, as it aligns most easily to existing infrastructure and knowledge. However, biofuels growth in China will be carefully managed by government departments to ensure no impact is seen on the availability of food, although we are not seeing the level of government involvement that is afforded to electric vehicles."

Major oil companies are continuing to make investments in biofuels, but there's not one clear winner. Cellulosic and algae biofuels get a lot of support and funding, but both have significant limitations for meeting federal targets in the US and in China. Corn ethanol still takes the driver's seat in the US. As for now, China is fueling most of its vehicles with diesel and it's yet to be seen what alternative fuels and technology will expand in the rapidly growing Chinese transportation market.

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