Surprising Biofuels

by Elaine Schwartz    •    Nov 10, 2011    •    614 Views

McDonald’s used fryer grease?

Alaska Air might want it. On 75 commercial flights, they will partially fill their tanks with biofuels that contain used cooking oil. Selecting algae for its biofuel blend, United flew from Houston to Chicago on its “Eco skies test flight.”

Commercial aviation is looking at biofuel blends to diminish their carbon footprint. In a WSJ list of 4 airlines, Lufthansa has the greatest commitment with 1200 commercial flights while United, with one, is at the bottom. Next year, the European Union has said it will implement a carbon emissions trading program for airlines. The problem, though, is that biofuels are 6 times as expensive as normal jet fuel.

The Economic Lesson

The key is cost. Thinking of the determinants of demand and supply, what might sufficiently shift a curve to lower the equilibrium price of one or several of the types of biofuel?

An Economic Question: On a demand/supply graph, describe a (hypothetical) reason that the supply curve for cooking oil-based biofuel might shift to the right.

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