Market penetration of biodiesel and ethanol

Market Penetration of Biodiesel and Ethanol. (May 2007) Kenneth Ray Szulczyk, B.S., Northern Michigan University; M.S., Oklahoma State University Chair of Advisory Committee: Dr. Bruce A. McCarl This dissertation examines the influence that economic and technological factors have on the penetration of biodiesel and ethanol into the transportation fuels market. This dissertation focuses on four aspects. The first involves the influence of fossil fuel prices, because biofuels are substitutes and have to compete in price. The second involves biofuel manufacturing technology, principally the feedstock-to-biofuel conversion rates, and the biofuel manufacturing costs. The third involves prices for greenhouse gas offsets. The fourth involves the agricultural commodity markets for feedstocks, and biofuel byproducts. This dissertation uses the Forest and Agricultural Sector Optimization Model-Greenhouse Gas (FASOM-GHG) to quantitatively examine these issues and calculates equilibrium prices and quantities, given market interactions, fossil fuel prices, carbon dioxide equivalent prices, government biofuel subsidies, technological improvement, and crop yield gains. The results indicate that for the ranges studied, gasoline prices have a major impact on aggregate ethanol production but only at low prices. At higher prices, one runs into a capacity constraint that limits expansion on the capacity of ethanol production. Aggregate biodiesel production is highly responsive to gasoline prices and increases over time. (Diesel fuel price is proportional to the gasoline price). Carbon dioxide equivalent prices expand the biodiesel industry, but have no impact on ethanol aggregate production when gasoline prices are high again because of refinery capacity expansion. Improvement of crop yields shows a similar pattern, expanding ethanol