Engagement in biofuel production: underlying factors in oil-rich countries

Abstract

The Balassa Specialization Index was used to determine the specialization of the countries. The results of the research revealed that the key factors of engagement in biofuel production in countries specializing in oil extraction and production of petroleum products are larger areas of available agricultural land and a greater focus on scientific research and experimental development. Meanwhile, among the countries which specialise in oil extraction only, bioethanol producing countries are characterised by larger quantities of available agricultural land, higher GDP levels and sufficiency of bioethanol production feedstock. Scientific discussions on the factors determining engagement in biofuel production by different countries are rather scarce, with a slightly larger numbers of studies into the drivers of biofuel production or other related activities in individual regions or districts. The identification of determinants of engagement in biofuel production helps to reveal the dominant national goals, which, presumably, depend on the mix of natural resources in the country. That is to say, the country's willingness to become a biofuel producer may be triggered by the shortage of energy resources, the abundance of agricultural production resources or a combination of both factors. In engagement in biofuel production, the environmental protection motive may also play a major role. When the development of biofuel production in oil-lacking countries is considered, the argument of the shortage of energy resources sounds plausible. However, this argument seems to be less convincing with respect of the participation of oil-rich countries in biofuel production. The work conceptualizes engagement in biofuel production based on the location theory. The aim of the article is to offer a theoretical definition of the determinants of engagement in biofuel production and to empirically test the manifestation of those factors in oil-rich nations. In order to circumvent the impact of the biofuel production heterogeneity, the research object is limited to bioethanol production. The methods of the research include analysis and synthesis of scientific literature, generalization, logical abstractions, the methods of descriptive statistics and probit regression. In this work, countries that specialise in oil extraction are attributed to oil-rich countries. Such oil-extracting countries are further divided into two groups to filter out countries that specialize in the production of petroleum products.