Can Biofuels Make Up the Difference for Struggling World Oil Production?

With Energy Information Agency (EIA) figures showing world crude + condensate figures on a plateau since 2005, biofuels -- typically ethanol and biodiesel -- have become an increasing portion of the world's liquid fuels mix. In the US alone, biofuels production has risen from 440,000 barrels per day in 2005 to 600,000 barrels per day in 2007. This increase of 160,000 barrels per day represents the only net increase in US liquid fuels production. By comparison, US oil production in the same period dropped by 90,000 barrels per day.

Around the world, biofuels have also seen an increase. According to the Worldwatch Institute, the year 2006 saw a 28% total increase in biofuels production to almost 1 million barrels per day. While this number may seem small in comparison to total liquid fuels production of around 86 million barrels per day, according to the EIA, it is nearly equivalent to the amount of oil Kazakhstan exports every year. With Kazakhstan being the 14th top exporter in the world in 2006, this number is significant.

But the current total of more than 1 million barrels per day pales in comparison to future expected production. According to the International Energy Agency (IEA), world biofuels production could reach as much as 1.75 million barrels per day by 2012 and potentially reach nearly 4 million barrels per day by 2020 -- an amount almost equal to Iran's total current oil production.

While these numbers are impressive -- there has never been such an effort on the part of the world to produce so much liquid fuel organically -- the challenge faced is extraordinary.

According to the Cambridge Energy Research Association (CERA), known optimists on world oil supply, the current depletion rate for existing oil wells is 4.5 per cent. Depletion measures the speed at which worldwide reserves of oil are being drawn down. All things being equal, 4.5 per cent depletion means that around 3.8 million barrels per day of production capacity must be replaced every year just to keep pace. And that's from an 'optimistic' perspective on depletion.