Palm oil at new high on food sector demand

Palm oil is at a new high on food sector demand, according to my colleague Anu Agrual, writing from Singapore on ICIS news.

Disclosure (I work for ICIS: About ICIS)

The key message from the story is that in the far east Palm oil is more highly valued as food than as a fuel and that it will take government action to impose quotas before it can be used as fuel. Most Asian palm oil boidiesel plants are closed, he says.

The high price of palm oil, and the rising prices of alternatives means that the viability of any biofuel processes that are based on palm oil will be looking increasingly poor. It also means that there will be increased pressure to grow more palm oil, which could have repercussions for biodiversity and for the people who farm near on in the forests.

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6 Responses to Palm oil at new high on food sector demand

  1. David B. Benson 9 November, 2007 at 1:54 am #

    What a shock!

  2. KillerRaj(Rajesh Valluri) 9 November, 2007 at 3:33 am #

    Check this out dude. If crude really loses 40 to 50 dollars, all things being the same, all the initiatives for alternate fuels would become too expensive to pursue. May be we do need expensive crude for the alternatives to be viable and competitive, which means a more balanced energy spectrum for the future.
    http://reviewstuff.com/NewBlogs/?p=130

  3. Biofuelsimon 9 November, 2007 at 3:25 pm #

    I guess it helps to put the hype into perspective.

  4. David B. Benson 9 November, 2007 at 11:23 pm #

    The futures market for crude does not force the price, IMO, any more than the similar markets in other commodities do.

    The only way the price of crude would drop 40 to 59 dollars is in the event of a world-wide recession. I have no idea how likely that is.

  5. biofuelsimon 16 November, 2007 at 10:58 am #

    Hi David, I don’t do macroeconomics (my pal Paul Hodges does over on Chemistry and the Economy) but with the sub-prime mortgage still rippling at the top end of world’s biggest economies we shouldn’t entirely rule out the possibility that 2009 and 2010 could be harder than ’06 and ’07.

  6. Mark C R UK 19 November, 2007 at 1:21 pm #

    “The only way the price of crude would drop 40 to 59 dollars is in the event of a world-wide recession. I have no idea how likely that is.”

    Nothing short of nuclear war or a pandemic i.e. a mass human depopulation would cause that sort of price drop. (after a huge jump – and in a purely theoretical sense).
    I doubt a world wide recession would even be sufficient to make it drop below $60 USD per barrel! Purely since OPEC would immediately take action to “secure” the price buy reducing production like they have previously.

    One rumour I heard was that if the speculators left the oil market right now (sub-prime/currency concerns were solved) oil would be at between $75 and $85 USD per barrel… not too far off where it was several months ago…

    Thats still above the $55 / barrel – often quoted as making biofuels feasible (in a reasonable macroeconomic policy situation)….. plus above OPECs previously stated policy of keeping the price (early in the 2000′s) above $50 USD per barrel.

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