Current oil prices make it possible to explore market potential for biofuels developed in Purdue University laboratories and going through the scientific tests.

With crude oil prices close to $100 a barrel, tests indicate an energy-dense biofuel made from biomass such as corn or grass may be economical to produce as a potential substitute for hydrocarbons, researchers at the university said.

This week, however, oil prices dipped to near $84 per barrel on the New York Mercantile Exchange while natural gas inched forward to $2.46 per million British thermal units.

Scientists say that even at a little lower oil price the biofuel research will remain feasible.

The Purdue University research, funded by the U.S. Department of Energy and the U.S. Air Force Office of Scientific Research, showed that it may be possible to move beyond the laboratory setting and produce the biofuel on an industrial scale.

A Purdue economic analysis indicated the cost of the thermo-chemical H2Bioil method is competitive when crude oil is about $100 per barrel.

That linkage is explained by the fact that the biofuel is produced using certain energy methods that create hydrogen needed for the process. If a federal carbon tax is implemented, the biofuel would become even more economical, the university said.

H2Bioil is created when biomass, such as switchgrass or corn stover, is heated rapidly to about 500 degrees Celsius in the presence of pressurized hydrogen.

Resulting gases are passed over catalysts, causing reactions that separate oxygen from carbon molecules, making the carbon molecules high in energy content, similar to gasoline molecules.

The conversion process was created in the lab of Rakesh Agrawal, Winthrop E. Stone distinguished professor of chemical engineering at Purdue. He said H2Bioil has significant advantages over traditional standalone methods used to create fuels from biomass.

"The process is quite fast and converts entire biomass to liquid fuel," Agrawal said in a release. "As a result, the yields are substantially higher. Once the process is fully developed, due to the use of external hydrogen, the yield is expected to be two to three times that of the current competing technologies."

The economic analysis, published in the June issue of Biomass Conversion and Biorefinery, shows that the energy source used to create hydrogen for the process makes all the difference when determining whether the biofuel is cost-effective, the university said.

Hydrogen processed using natural gas or coal makes the H2Bioil cost-effective when crude oil is just over $100 per barrel. But hydrogen derived from other, more expensive, energy sources -- nuclear, wind or solar --drive up the break-even point, said the university.

"We're in the ballpark," said Wally Tyner, James and Lois Ackerman professor of agricultural economics at Purdue. For biofuels to be competitive, "crude prices would need to be at about $120 per barrel. This process looks like it could be competitive when crude is even a little cheaper than that."

Agrawal said he and colleagues Fabio Ribeiro, a Purdue professor of chemical engineering, and Nick Delgass, Purdue's Maxine Spencer Nichols professor of chemical engineering, are working to develop catalysts needed for the H2Bioil conversion processes. The method's initial implementation has worked on a laboratory scale and is being refined so it would become effective on a commercial scale.

"This economic analysis shows us that the process is viable on a commercial scale," Agrawal said. "We can now go back to the lab and focus on refining and improving the process with confidence."

The model Tyner used assumed that corn stover, switchgrass and miscanthus would be the primary feedstocks. The analysis also found that if a federal carbon tax were introduced, driving up the cost of coal and natural gas, more expensive methods for producing hydrogen would become competitive.

"If we had a carbon tax in the future, the break-even prices would be competitive even for nuclear," Tyner said. "Wind and solar, not yet, but maybe down the road."

There was no immediate independent comment on the researchers' claim. Biofuel research is under way worldwide, with mixed results.

Biomass use for creating energy has also triggered controversy in countries where food crops have been replaced with feedstock agriculture geared toward creating biomass.