- Since the outbreak of the Iran war, crude prices have spiked by roughly 30%, while corn – key for ethanol – has risen by only about 5%, making ethanol and biodiesel blends more attractive.
- Vietnam is accelerating its switch to gasoline blended with 10% ethanol; Indonesia has increased biodiesel blending to 50% (B50) and Malaysia is boosting export quotas.
- Analysts note that grain supplies are currently ample, but higher biofuel demand could stoke the longstanding debate over whether crops should be used for energy.
Soaring crude prices in the wake of the Iran conflict are reviving interest in biofuels, offering a potential hedge against volatile fossil fuel costs but raising fresh questions over sustainability.
According to reports, oil has gained about 30% since the war began, whereas corn prices have risen by only around 5%, sharply improving the economics of ethanol blending. That price differential is prompting governments, particularly in Asia, to accelerate biofuel mandates in the hope of cushioning motorists from rising pump prices and reducing foreign exchange outflows.
Vietnam, which currently blends 5% ethanol into gasoline, plans to double that to 10% ahead of schedule. Indonesia has ratcheted up its biodiesel requirements to 50%, up from 35%, and is considering further increases.
Malaysia, a major palm‑oil producer, has boosted export quotas for biodiesel feedstock and expects to expand its domestic blending programme. These moves echo earlier waves of biofuel enthusiasm during oil price spikes in 2008 and the mid‑2010s.
However, unlike past cycles, policymakers insist that they are balancing food security with energy security: global grain stocks are currently comfortable, and most countries impose caps on the share of food crops that can be diverted into fuel.
In Europe and North America the picture is mixed. The EU has maintained a cap on crop‑based biofuels at around 7% of road transport energy to mitigate deforestation and food‑price impacts. Nevertheless, some member states are seeking to relax these limits temporarily to reduce dependence on Middle Eastern oil.
In the US, the Environmental Protection Agency has raised renewable fuel blending mandates for 2026 and beyond, and industry lobbyists are pushing for further increases. Brazil, the world’s second‑largest ethanol producer, has not yet announced changes but is closely monitoring the market.
The renewed push for biofuels could have significant knock‑on effects. Farmers may devote more land to corn and palm oil, potentially increasing deforestation risk unless strong sustainability standards are enforced.
For oil refiners and traders, rising biofuel volumes could displace millions of barrels of gasoline and diesel demand, depressing margins. Airlines and shipping companies are also watching developments closely as they seek sustainable aviation fuel and marine biodiesel to meet decarbonisation targets.
For UK stakeholders, the biofuel revival underscores the complex interplay between energy security and climate goals. While the UK has its own renewable transport fuel obligation, the rapid expansion of biofuels in Asia could influence global feedstock prices and encourage policymakers to revisit blending mandates.
The debate also highlights that diversification strategies – whether EVs, biofuels or hydrogen – can only be sustained if they avoid exacerbating other environmental crises. As oil prices remain elevated and geopolitical risks persist, the balance between food, fuel and climate will be at the forefront of energy strategy discussions.
