A Fat Chance of Lower Diesel Prices

ConocoPhillips, the oil company that finally became somewhat better known on the West Coast when they bought out Union 76, is teaming up with Tyson Foods to create and sell diesel fuel formulated from animal fats.

Both companies have been working together for about a year and are pooling their research and development capabilities, as well as their marketing savvy, to make the new fuel. This novel biodiesel will have reduced carbon emissions compared to conventional diesel fuels. Critics complain that ConocoPhillips will have an unfair advantage over other fuel companies by using tax credits earmarked for creating new refining capacity for clean burning fuels even though they'll be using currently on-line refineries instead of building new ones. The credits stem from the new source for the fat used in the product. Thus far, most of the firms involved with biodiesels have been concentrating on vegetable oil as a base, but things are changing.

ConocoPhillips plans to spend some $100 over the next few years to create and market the product. The company's Chairman and CEO Jim Mulva held a press conference on April 16 with the head of Tyson, and Mulva explained they hope to begin the sale of the biodiesel in the American Midwest in the fourth quarter of 2007. Tyson's part in this venture is expected to be in the role of minority partner, since all they are supplying is the fat and ConocoPhillips will be fronting the refineries and raw fuel stock.

Because Tyson is this country's largest meat company, they are by association the number one producer of chicken, hog, and beef fat. Tyson is looking for this endeavor to add four to sixteen cents a share to its stock by the time full-blown production is reached in 2009. Stock in both partners was up noticeably by the end of trading on Monday, April 16.

Tyson and ConocoPhillips jointly stated that this will be a renewable diesel mix that meets all federal ultra-low sulfur diesel standards and eventually hope to produce about 175 million gallons a year, roughly three percent of the fuel producer's U.S. diesel output, which should help lower diesel prices.