Farmers could help ease the fuel crisis, the government has said. The Department for Environment, Food and Rural Affairs wants more farmers to grow biofuel or biomass crops and believes that oil at $60-plus a barrel and petrol at £1 a litre could make the business case more compelling.
Margaret Beckett, environment secretary, said: "It could be profitable for farmers to grow biofuels [at a time of high oil prices]."
Biofuels such as ethanol can be added to petrol and used in normal vehicle engines without requiring their modification. Carmakers agree that at least 5 per cent of petrol can be made up of ethanol. Many in the biofuels industry believe this could be revised up to 10 per cent or more.
Ethanol, which can be made from grain or sugar beet, burns in much the same way as petrol and can enhance engine performance. In countries such as Brazil and Sweden, many cars run on 85 per cent ethanol and 15 per cent petrol.
In recent months, ethanol has been cheaper than petrol in many regions as the oil price has pushed upward while increasing ethanol production has driven down its cost. However, the squeeze on supply resulting from increased demand has recently driven up ethanol prices again. If the oil price continues to rise, and ethanol output increases, it may swing back into favour.
Ms Beckett acknowledged the UK had a long way to go to build up its biofuel industry: "This country is coming from a very low base in terms of biofuel production. The question is how speedily we can move."
It can take farmers a year or two to change their crops. In 2003, biomass provided only 1.2 per cent of the UK's energy needs, and about 4 per cent of Europe's, according to Eurostat.
A government taskforce on biofuels, chaired by Sir Ben Gill, the former president of the National Farmers' Union, is expected to report in October with suggestions on how to increase the production and take-up of biofuels.
However, Ms Beckett refused to pledge government support to one of the most contentious measures on biofuels proposed by farmers: a renewable transport fuel obligation.
The RTFO would be modelled on the obligation on power companies to generate a certain amount of electricity from renewable sources, such as wind and the sun. It would stipulate that a certain amount of fuel at the pump should come from renewable sources.
Peter Kendall, NFU deputy president, said: "It would be a way to bring more certainty to fuel prices."
Many environmental groups favour biomass as an alternative to fossil fuels. Although both produce carbon dioxide, biomass crops take up carbon dioxide from the atmosphere as they grow, making the fuel "carbon neutral" over its lifetime, and thus not a contributor to climate change.
Ms Beckett said the RTFO would be considered, but the government is believed to be concerned the obligation could push up fuel prices or lead to biofuel imports that would stifle a domestic market for the crops.
Recent reforms to the Common Agricultural Policy that allow farmers more freedom in what they grow would encourage more to grow fuel crops. Mariann Fischer Boel, EU agriculture commissioner, agreed: "Agricultural reform fits exactly into what needs to be done [to combat climate change]."