Tuesday, July 15, 2008

Diesel vs Biodiesel Pricing?

With high oil, high gas and even higher diesel prices, many Biodiesel enthusiasts are having a field day with "I told you so", but this would be a mistake. Though the biodiesel price seems coupled to dino diesel pricing on a competitive and resources level...they are actually surprisingly unassociated for many customers in the industry. And generally, customers "happily" pay more.
Consider that the majority of the transportation biodiesel is sold to government or private fleets. They are often have a reason for the extra "effort" (at least at this time) for running bio or a blend, usually health/patriotic/local economic reasons, but more frequently now a government mandate. These are not the same market forces on petroleum fuels.
Often I recommend small producers or distributors to raise their biodiesel prices as the number one way to improve their business model, even against their instincts in times like this. Consistently the feedback is shock and pleasant surprise. Customers expect to pay a premium (at this time) for a unique fuel (at this time). The negative pricing feedback that forms impressions on biodiesel retailers often from "prospective" customers on the phone, the equivalent of tie-kickers and window shoppers. Real market analysis reveals a true picture: price is decoupled from petroleum, and premium pricing is fine, and good for the fledgling industry. And soon the market will reflect that.
So don't get too haughty about your cheap biodiesel...expensive biodiesel is actually better and probably inevitable in the near future. Sorry 'bout bursting your bubble.

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