The U.S. biofuels story is a mix of interrelated elements: energy security (lessening dependence on Middle Eastern oil), ethanol, a clean energy economy…and China.

Traditionally, the geopolitical reality plays out like this: the United States relies on politically sensitive Middle Eastern petroleum, which makes the U.S. particularly sensitive to oil price volatility, which in turn, compels the U.S. to invest money and human capital in guaranteeing supply.

But as a major corn producer, the United States commits corn resources to biofuels in the name of moving towards energy independence, price security, and a clean energy economy.  Meanwhile, China is industrializing, making a lot of money in the process, and beginning to suck up a rapidly growing percentage of the global supply of crude oil.

Taking another look at the geopolitical reality, more recently, it plays out like this: the United States is getting squeezed out of the global marketplace.  More and more, it is scrambling to find oil as it can no longer guarantee supply through sheer grit, dollars, and boots on the ground.

In the past year, China has become the top destination, the largest market, for Saudi crude — replacing the United States in the process.  An article in Arab News explains:

Over the past two years, Saudi oil exports to China have increased by 60 percent. And in the meantime, the Chinese appetite for crude continues to grow and grow. Chinese crude oil imports could surge by more than 40 percent over the next three months after hitting an all-time high of 5 million barrels per day in December. The share of Saudi crude in the Chinese markets has now increased from 16 percent to 20 percent. China and Saudi Arabia also aim to boost bilateral trade by at least 50 percent to $60 billion by 2015, the Chinese Trade Minister Chen Deming said last month.

During that time, Saudi crude exports to the U.S. have fallen off dramatically, despite being one of its key suppliers.  In August 2009, imports from Saudi Arabia fell to 745,000 barrels per day, the lowest in more than two decades.

There could be many reasons for this, but most likely it’s a combination of lower demand within the United States due to the economic downturn, an effort to diversify away from Middle Eastern supplies, and a concerted effort to build out the country’s biofuels capacity.  China — which never really lost demand — snapped up the leftovers, and it’s snapping up more and more.

But the key message: within this new geopolitical reality, the rosy logic of biofuels is starting to take on a different hue.

With China and other rapidly developing countries acting like a vice on the global crude market, biofuels are rapidly becoming a strategic necessity for the United States, not just a means to mitigate greenhouse gases or create jobs.  As evidence of this new reality, Saudi Aramco, Saudi Arabia’s state petroleum company, is abandoning crude storage installations in the Caribbean in favor of facilities located in Japan, closer to the Chinese end-markets.

The Obama Administration recognizes this reality and strongly endorsed the biofuels agenda last week.  But commercializing technologies and growing enough to displace a sizeable percentage of foreign crude is a tall order.  Biofuels will never be a complete solution, but it remains a key strategic resource heading forward.

Mackinnon Lawrence is an attorney, principal consultant with Biomass Advisors, and editor & publisher of Biomass Intel.

photo: alexpgp

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Dow Chemical Company, a worldwide leader in the global chemical industry, and sponsor of the 2010 Dow Live Earth Run for Water, has entered into agreements with the new Saudi Arabian King Abdullah University of Science and Technology (KAUST)  for developing cleaner, new routes for producing chemical derivatives.

The two are also looking into ways for carbon capture –a method which proposes to suck up and store greenhouse gas emissions.

Although many of the chemicals produced by the American chemical giant are used in the petroleum distilling and petrochemical industries, with much of the company’s “raw material” is coming from Saudi Arabia.

Both Dow executives and the Saudi Arabian government know they need to become involved in projects that are  more environmentally friendly; especially in the energy market.

KAUST is a new graduate level academic institution that just opened its doors in September, and whose campus has been designed to be more eco-sustainable and better adapted to being located in the harsh, hot climate of the Arabia Peninsula.

Read a previous Green Prophet article about its unique architectural and environmentally friendly designs.

In addition to the joint chemical derivatives projects, Dow also plans to explore being involved in ecological projects which will be carried out at KAUST’s Research Park and Innovations Cluster. Some of these projects include CO2 capture, enhanced oil recovery, water desalination, solar energy and wind energy.

CO2 capture and storage or CCS, sequesters carbon dioxide gas that is present during the petroleum distillation process to prevent it from escaping into the atmosphere and contributing to global warming.

Dow for its part, appears to be getting more involved in areas dealing with the environment and the company’s social responsibility towards helping the planet after so many years of being heavily connected with the petroleum industry and its effect on the world environment.

Trying to find solutions to the water resource problems that many countries face, including Saudi Arabia, is now an important part of Dow’s environmental responsibility goals. Dow was part of August’s World Water Week, held in Stockholm, where delegates from nations all over the world met to explore ways in which  countries can work together to find solutions to preserving present fresh water resources, recycling waste water, and producing fresh water from desalination and other means.

For its part, the Kingdom of Saudi Arabia now has what is said to be the world’s largest desalination plant and is now able to produce 70% of its fresh water from reverse osmosis and other methods of desalination.

These will be some of the projects that both Dow and KAUST research teams will be jointly involved in within the framework of this agreement, as well as the chemical derivatives research, which hopefully will not be dedicated to the long term continuation and dependence on fossil fuels.

Article by Maurice Picow appearing courtesy of Green Prophet

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