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Bio-fuel producers hit back at OPEC

The global bio-fuels sector has launched a ferocious attack on the Organization of the Petroleum Exporting Countries (OPEC) oil cartel by accusing it of deliberately “misleading” the public about who is responsible for soaring fuel prices.

An open letter to Chakib Khelil, president of OPEC, from the main bio-fuel organisations in Europe, North America and Brazil accuses him of providing self-serving explanations by claiming that 40 per cent of the $140-a-barrel crude price results from the intrusion of bio-ethanol into the market.

“Since you, as head of OPEC, provide no explanation for what in our view constitutes a self-serving and misleading statement that goes counter to any independent analysis of the fuels market today, one can only conclude that OPEC views competition with bio-fuels as a direct threat,” says the letter signed by the European Bio-ethanol Fuel Association, the Renewable Fuels Association in the U.S., the Canadian Renewable Fuels Association and the Brazilian sugar-cane producers of Unica.

The organisations point instead to a recent piece of research from the investment bank Merrill Lynch suggesting that bio-fuels push crude prices 15 per cent lower than they otherwise would be. They note that petrol prices in Brazil have not risen in two years because of competition from sugar cane-derived ethanol.

Last month OPEC warned western countries that their efforts to develop bio-fuels as an alternative energy source to combat climate change risked driving the price of oil ‘”through the roof.”

Abdalla el-Badri, secretary general of OPEC, said the cartel was considering cutting its investment in new oil production in response to moves by the developed world to use more bio-fuels.

The bio-fuels industry says OPEC members are heading for revenues of $1.2tn this year as a result of the “exorbitant” price of oil.

“We realise that bio-fuels may be reducing your windfall profits,” said the letter, which was published as a whole-page advert in the Financial Times. “But, perhaps, the time for OPEC to face some competition has finally arrived.” — © Guardian Newspapers Limited, 2008

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