Biofuels Production

The biofuels industry in the US is dominated by ethanol production, which includes about 275 companies with combined annual revenue of nearly $19 billion. Major ethanol producers include Archer Daniels Midland, Cargill, BP, and Chevron.

COMPETITIVE LANDSCAPE

Demand is driven by federal legislation and regulations that establish a government-mandated market for biofuels. The profitability of biofuel production facilities depends on prices of gasoline and diesel, which fluctuate based on world petroleum demand and domestic refinery utilization. Economies of scale in ethanol production are limited due to the transportation costs associated with gathering feedstocks (corn and other biomasses) and transporting the ethanol to blending sites. As a result, large companies operate multiple production facilities. Small companies can compete effectively by developing business relations with distributors and by delivering consistently. The industry is capital-intensive: average annual revenue per employee in ethanol production facilities is about $2 million per year.

Biofuels is a young industry that has grown rapidly. New entrants join the field constantly and new technology breakthroughs are frequent. Federal and state government subsidies and loan guarantees keep barriers to entry relatively low.

PRODUCTS, OPERATIONS & TECHNOLOGY

The major products of the biofuels industry are ethanol and biodiesel. Ethanol makes up more than 90 percent of current US biofuels production of about 11 billion gallons per year, meaning that about 10 billion gallons of ethanol is produced annually. About 700 million gallons of biodiesel is produced annually. US ...