Tuesday, November 08, 2011

French Fries in the Sky

Recently Alaska Airlines announced plans to begin regular flights using a blend of fossil jet fuel and bio-jet fuel.  At least seventy-five of its flights in the month of November will be power by a blend

The airline is apparently paying a premium for biodiesel produced by Dynamic Fuels in Louisiana in an effort to prove that bio-jet fuel is a practical alternative to fossil jet fuel.  It is not a cheap demonstration as Alaska is paying upwards of $16.00 per gallon for the bio-jet fuel compared to $3.15 for fossil jet-fuel.  That brings the per gallon cost to $5.72 per gallon.

That price is expected to fall as producers like Dynamic Fuels reach economies of scale.  The start-up produces its biofuel with used cooking oil and by-products from meat processing.  With strong relationships like that with Alaska Air perhaps its greatest concern is ensuring reliable stream of feedstock.

Dynamic Fuels is a joint-venture of Tyson Foods, Inc. (TSN:  NYSE), and Syntroleum Corporation (SYNM:  Nasdaq). Of the two it makes sense to use SYNM for as a biofuel play.  However, it would not be surprising to see an initial public offering from Dynamic Fuels in the future.  

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.  Dynamic Fuels is included in the Biofuel Group in Crystal Equity Research’s Beach Boys Index for alternative energy producers and developers.

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