On Nov. 7, Continental Airlines flight 403 made history by becoming the first commercial flight powered by a mixture of biofuel and traditional petroleum-based jet fuel. Two days later, Alaska Airlines started the first of 75 flights powered by a mixture of biofuel. As the price of oil and subsequently jet fuel continue to rise, many airlines are looking for ways to reduce fuel costs and have begun to look towards biofuels.

Although the price of biofuel is approximately six times more than traditional jet fuel, airlines are attempting to increase exposure of the “green” fuel. With more attention put on the biofuel industry, the pressure to reduce the cost of the fuel continues to build. The recent move towards this alternative fuel source is a direct result of jet fuel costs. Ten years ago fuel accounted for about 15% of airline operating expenses, while today it accounts for 35% of expenses and continues to eat into profit margins, the Associated Press reports.

Biofuels are attractive due to the fact commercial planes do not need to be modified to run on the fuel, and there is no difference in performance of planes. However, in order to bring the cost down the demand for jet biofuel needs to increase. Bob Ames, Vice President of Tyson Foods, which has the capacity to produce 75 million gallons of biofuel per year from animal fats, in an Aviation Week report stated, “The lion’s share is biodiesel. We are making jet fuel in batches because there is not consistent demand.”

Apart from the strong demand for biodiesel, biofuel demand is growing in the airline as well as other industries. Under a $510 million program the Navy will purchase biofuel to power fighter jets, ships, unmanned spy planes and other vehicles. For example, a few weeks ago a naval ship carrying 20,000 gallons of a 50-50 blend of biofuel and petroleum-based fuel successfully completed a trip along the California coast, according to a TG Daily report.

How can investors expose themselves to the growing demand for biofuels? ELEMENTS MLCX Biofuels Index Total Return ETN (NYSEArca: FUE), which tracks futures contracts on physical commodities that are either biofuels themselves or used in the production of biofuels (i.e. corn and soybeans), offers investors an easy way to add exposure. Teucrium Corn ETF (NYSEArca: CORN), which invests primarily in corn (used to produce ethanol), is another option for investors looking to add exposure to biofuels.

ELEMENTS MLCX Biofuels Index Total Return ETN

August Koster contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.