It is easy to imagine that the big oil companies, commodities traders and the Saudis are the only ones making substantial profits from the explosion in international oil prices. But one group that also stands to make very large sums are the providers of biofuels.

The Irish government has a biofuels scheme which allows for €200 million in subsidies over a five-year period. The government is aiming to have biofuels account for 2 per cent of our fuel market this year.

Basically, biofuels cost more to produce than conventional mineral fuels. The state subsidy is aimed at mitigating that extra cost and allowing the likes of biodiesel to be sold at the same price as mineral fuels.

In some cases, 100 per cent of the fuel at a biofuel pump has been generated from natural recycled product. For others, around 5 per cent of biofuel is blended with 95 per cent conventional fuel.

Under the government system the subsidy replaces the excise duty on the fuel. So instead of the excise going to the Exchequer it goes to the producer. This enables the biodiesel producer to cover the higher cost of production without having a more expensive product at the pumps.

The really good news for producers is that when petrol and diesel prices go up, their cost of production remains pretty much the same; except for the cost of heat, light or transportation in the processing stage. The raw material for wholesale purchasers of conventional fuel is oil. So when the price of oil goes up, the price at the pumps must go up just to keep profit margins the same.

However, with biofuels, when the price of fuel at the pumps goes up, the biofuel producer just makes even more money.

The EU drafted a directive back in 2006 on biofuels and wants 10 per cent of all EU transport fuel to come from biological sources by 2030. It is an audacious target from which there are already signs of back-tracking. Biofuels produced from crops have been driving up the price of grain and leading to higher global food prices. The EU is having a re-think.

The EU did warn member states over two years ago that if the price of oil rose significantly, there was scope for biofuel producers to make super profits. At the time oil was trading at around $35 a barrel. It is now closer to $135 a barrel. So it could be good times all round for Ireland’s biofuel producers.

The big players who were awarded quotas under the government scheme included Philip Lynch’s On€51, Bord na Mona, Larry Goodman’s Irish Food Processors, Topaz and an offshoot of John Teeling’s Cooley Distilleries.

Of all of these, Larry Goodman has come up with the most ambitious plan. He is planning to build the biggest biodiesel plant in Europe. Initial proposals to locate the site in Pembrokeshire in Wales have been switched to a new location outside Manchester.

Goodman wants to build a plant capable of processing 110 million litres of renewal fuel each year. As the biggest beef processor in Ireland, he has access to tallow for any operations he wants to build here.

In the British market he has been busy buying up suppliers of used cooking oil. He now has 30 per cent of the used cooking oil market in Britain.

This means he has access to government subsidies and the raw material used to make the fuel. With meteoric oil prices, industry sources estimate he could make €30 million per year from this business when it is fully operational.

Furthermore, any climbdown on the use of biofuels because of the effect they are having on food prices, would have a greater impact on those producing biofuels from crops.

Goodman is involved with tallow and used cooking oil, neither of which are likely to push up the cost of food anywhere. It looks like a win/win for the Louthman.