Aviation Biofuels About to Take Off

Oil Price, John Daly

An extraordinary convergence of recent events seems poised shortly to make aviation biofuels the belle of the investor's ball.

The first is that on June 8, the international standards certifying body ASTM International announcing its approval of its BIO SPK Fuel Standard, to be made official later in 2011, of the use of hydrotreated renewable jet (HRJ) Jet A-1 fuel in commercial aviation. The potential financial implications are massive; together, the airline industry and the U.S. military use more than 42.25M gallons (1.5 Mbbl.) jet fuel a day.

One of the leading contenders for ramping-up production of Jet A-1 HRJ is camelina, which has undergone extensive testing by both civilian airlines and the U.S. military. Camelina HRJ qualifies as a "drop-in" fuel, which can simply be mixed with regular Jet A-1 in a 50:50 ratio, allowing jet engines to function without any modifications.

In March 2010, Biomass Advisors released its 116-page study entitled, Camelina Aviation Biofuels Market Opportunity and Renewable Energy Strategy Report, projecting that, by 2025 1B gallons of camelina biofuel would be produced for the aviation and biodiesel sectors, creating 25,000 new jobs, producing over $5.5B in new revenues and $3.5B in new agricultural income for U.S. and Canadian farmers. Biofuels Digest is projecting that global advanced biofuels capacity will reach 4.003B gallons by 2015, based on company announcements to date, with capacity reaching 718 million gallons in 2011, 1.522 billion by 2012, 2.685 billion by 2013, and 3.579 billion gallons by 2014.

Fuel and oil comprise 25 percent of civilian airlines' operating costs. When the price of jet fuel rises $0.01, it increases the global cost of aviation to $195M.

The second development is that the critical mass of HRJ fuels, both civilian and military aircraft, has been completed. And I haven't even mentioned Pentagon interest in biofuels—yet.