Biodiesel profits elusive as costs rise

Scott Susich, a fuel expert at the Energy Management Institute, a consultant to energy companies, said oil pipelines have been reluctant to send biodiesel blends through their ducts because they fear it will contaminate other fuels.

Building new lines could prove difficult. The major U.S. oil product lines were built during World War II for national security reasons. Since then, many more homes have risen around consumption areas and residents would likely fight the building of new lines, he said.

Tyner estimated that stranded capacity can discount biodiesel prices by as much as 85 cents per gallon.

To improve profits, some producers are looking to new biodiesel feedstocks such as non-food crops and algae.

"The positive thing to come out of this is that it is spurring a renaissance that may spur development of new feedstocks," said Higgins, who added that wide use of new sources could be years away.

(Editing by Christian Wiessner)