Biofuel investments seen good bet with pricey oil

By Sam Cage

DAVOS, Switzerland (Reuters) - Biofuels made from plants and waste will prove an increasingly efficient and cheap substitute for oil in many areas over the coming five years, industry analysts said.

As long as crude sells at prices towards $100 per barrel, there will be strong demand for cheaper biofuels and manufacturing technology will improve, Vinod Khosla, founder of venture capital firm Khosla Ventures, told Reuters.

"It's very clear to me that within the next few years -- about three I would guess, definitely less than five -- we will prove that biofuels are as adequate as oil," Khosla said at the annual meeting of the World Economic Forum.

Biofuels can replace oil as transport fuel and heating. They can also be used in manufacturing.

Khosla estimated oil would have to fall below $50 a barrel to be competitive in three or four years.

"If I had to look ahead 10 or 15 years, I guess the number would be $35," he said.

Biofuels are seen as a way of cutting reliance on oil as fuel and thereby reducing greenhouse gas emissions.

But there is criticism that they raise food prices and also harm the environment during their manufacture.