Abstract
... In only a very few countries do biofuels have the potential to make a significant dent in dependence
on imported oils. The amount of fossil fuels that can be displaced by domestic production of biofuels will
be small in the great majority of countries. What’s more, an augmented biofuels market will tend to
increase the positive relation between oil prices and biofuel costs. Higher oil prices will both raise the
production cost of biofuels (as fossil fuels are an important input in the production process) and exert
upward pressure on agricultural commodity prices as a result of the increased demand for them. This limits
the possibility for biofuels to reduce transport fuel prices.
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