At present the world's economies are based on energy sources extracted from static stores - oil and coal fields. Since people began to use oil as a main energy source the supply of oil has been treated as though it was inexhaustible. Clearly, this is not the case. The amount of oil on the planet is certainly finite. We may not know exactly how much there is but there is certainly a limit. There must come a time when oil will not be available for many of the things we use it for now.

Today (2004) the price of oil is rising. It has more than doubled from its price only a couple of years ago. This may be a sign that rising demand is not being met by the rate of extraction. People in the industry argue that this is not necessarily a permanent problem, but it is known that for many decades less new oil has been discovered than has been pumped. In 2004 apparently minor problems with the loss of supply from such companies as Yukos in Russia, or guerrillas blowing up pipelines in Iraq or fighting in the Nigerian oil fields have caused spikes in the price. Meanwhile the demand for oil from the rapidly growing economies of China and India also influences the price, making it rise.

It seems to be the case that the existing wells can only meet the demand for oil if they are all operating efficiently. No-one believes there are now huge new oil fields ready to be developed which will replace oil reservoirs that are becoming exhausted. The conclusion from these facts must be that the price will remain high and probably rise further. But in addition probably the kind of spikes in price experienced in 2004 will also occur in the future. That is, although people should expect the price to rise in the future, it may not rise in a steady fashion but in unpredictable jumps. See Peak Oil

Biogas and other renewable energy sources will not experience these price rises.

The cost of biogas depends on two factors:

- the capital cost of the equipment to collect it.

- the cost of labour

These costs are not determined by multi-national corporations and are not dependent on worldwide demand. That is, a biogas plant is insulated from world prices (except for such things as steel and cement).

The value of biogas is determined by the prices of alternatives. That is, every use of biogas may be thought of as replacing some other fuel. These may be either imported oil products or local sources such as firewood and charcoal.

Consider two farms.

Here are two ways of examining the economics of biogas for the user.

1. The use of biogas by people who use little money - the traditional economy.

Consider a farming family who live mainly on their own produce and collect firewood from the forests, and draw water from streams.

If such a family acquires a simple biogas plant they will benefit. The main benefit will be in the ease of cooking. Time and labour will be saved by not having to collect firewood. That time will be available for other activities. Cooking with gas should take less time than with wood or charcoal. The output of the biogas plant put on their soil will improve their crop yields. If they are at present buying kerosene for lighting, they may be able to stop doing that if they have a gas lamp.

2. The use of biogas by commercial farms.
Consider a farming enterprise which produces for the local and even international market. That is, the owners expect to make money from their farm.

If such a business acquires a biogas plant they will benefit monetarily.

On a large scale, biogas can replace many other inputs to the farm that would otherwise have to be paid for. Static machinery can be powered by either biogas itself, or electricity generated by biogas. The only machinery that is at present hard to power from biogas is tractors and other farm vehicles. Thus a part of the farm's energy needs would be removed from exposure to the rise and fall of oil prices.

The output of a biogas plant applied to the soil can lead to the farm being classified as "organic" and therefore being likely to receive higher prices for its produce.

A large farm may be able to sell energy in the form of electricity supplied to the National Grid system.

3. Economics for the nation.

As farming enterprises install biogas plants there are effects on the national economy.

The most obvious is a reduction in the need to import oil fuels, at least for the agricultural industry.

This reduces the nation's exposure to the volatile prices of oil products. (Volatile means "can go up and down suddenly".)

A less obvious gain may be an improvement of the soil as more humus is returned to the soil from the outputs of biogas plants. Some conventional models of economic activity fail to value the soil so that a steady deterioration of its quality is not mentioned in the national accounts. The same is true of forests. The demand for charcoal can lead to complete deforestation. Biogas is a replacement for some of the charcoal now being used. (This would be of special interest to Haiti where deforestation for charcoal has led to destructive floods because the forests are no longer able to absorb the rain.)

If subsistence farms install biogas plants the main effect will be a reduced pressure on the forests as there will be fewer people trying to take firewood or charcoal. But they too would experience an improvement in soil quality. When a forest is cut there are often other effects such as more flooding when rain can no longer be absorbed by the tree roots and instead flows quickly on to lower land, often taking the soil with it.

Perhaps the greatest benefit would come to women who would no longer have to spend time looking for firewood. Probably, on a subsistence farm it is the women who would operate the biogas plant.