Asia Bets on Biofuels to Dodge Middle East Oil Shortages

Created at 4 Jul · 5:55 PM1 source↑ Market-relevant

IN SHORT

Asian nations are increasing biofuel production to counter high oil prices and supply disruptions stemming from the U.S.-Israeli war on Iran and the closure of the Strait of Hormuz. Countries like Vietnam and Indonesia are boosting ethanol and biodiesel use, leveraging local feedstocks to limit imports and support farmers, though concerns about food prices and deforestation persist.

Key Numbers

500°C-700°Cbiofuel feedstock heating temperature range

4.3 exajoulesbiofuel demand in 2022

10 exajoulesIEA projection for biofuel production by 2030

43biofuel projects expected operational by 2030

0.9%OECD projected annual biofuel use growth over next decade

3.3%biofuel annual growth in previous years

30%crude price increase between February and April

5%corn price increase over the same period

40%previous mandatory biodiesel blending rate in Indonesia

50%new mandatory biodiesel blending rate in Indonesia

70%estimated potential increase in biofuel demand by 2030

Who's Involved

International Energy Agency (IEA)

projected significant increase in biofuel use by 2030

Rystad Energy

reported 43 biofuel projects expected by 2030

ExxonMobil, Chevron, BP, Shell, TotalEnergies

oil and gas firms committing to biofuel production

OECD

expected slower global biofuel use growth

Beata Wojtkowska

biofuels analyst at Kpler

Kpler

data and analytics company

Kädi Ristkok

energy and climate director at Transport & Environment (T&E)

Transport & Environment (T&E)

think tank warning about biofuel impacts

Asia Bets on Biofuels to Dodge Middle East Oil Shortages

↳ Why This Matters

The renewed focus on biofuels highlights a global effort to diversify energy sources and mitigate the economic and geopolitical risks associated with oil supply disruptions, while also raising critical questions about food security and environmental sustainability.

Key facts

Asian countries are increasing biofuel production to mitigate oil shortages and high prices.
Vietnam plans to switch to ethanol-blended gasoline, and Indonesia is increasing its biodiesel blending rate.
The U.S.-Israeli war on Iran and closure of the Strait of Hormuz have driven oil prices up significantly.
Biofuels offer a more economical fuel option when crude prices are high.
Concerns exist regarding the impact of increased biofuel use on food prices and deforestation.

Interest in biofuels has resurged in 2026, driven by significant price volatility in fossil fuels and energy shortages resulting from the U.S.-Israeli war on Iran and the closure of the Strait of Hormuz. This geopolitical event has caused oil prices to surge, prompting governments and energy companies to explore alternative fuel production.

Asian countries, heavily reliant on Middle Eastern oil imports, are leading the investment in increased biofuel production. Vietnam has announced a full switch to ethanol-blended gasoline produced from sugarcane, while Indonesia is raising its mandatory biodiesel blending rate from palm oil. Brazil and Thailand have also recently increased their biofuel consumption.

Beata Wojtkowska, a biofuels analyst at Kpler, noted that Asian nations favor biofuels derived from local feedstocks, which helps them reduce energy imports and improve farmer profitability. However, Europe has shown more reluctance to ramp up biofuel production, citing concerns that excessive use could lead to higher food prices and increased deforestation rates.

Kädi Ristkok, energy and climate director at the think tank Transport & Environment (T&E), cautioned that promoting 'food for fuel' is a dangerous strategy. While acknowledging the understandable search for solutions to the current oil crisis, Ristkok stated that biofuels can only play a marginal role without severe consequences, particularly concerning food prices and the environment. T&E estimates that biofuel demand could rise by up to 70% by 2030 if global oil supplies remain constrained.

Frequently asked questions

The current interest in biofuels is driven by significant fossil fuel price volatility and energy shortages caused by the U.S.-Israeli war on Iran and the closure of the Strait of Hormuz.

Vietnam and Indonesia are increasing their biofuel production, with Vietnam switching to ethanol-blended gasoline and Indonesia raising its mandatory biodiesel blending rate. Brazil and Thailand have also increased their biofuel use.

Concerns include the potential for increased food prices and deforestation rates, as well as the argument that biofuels can only play a marginal role in the energy system without severe environmental and economic consequences.

What Happens Next

01Governments and energy companies will continue to assess investments in alternative fuel production.

02Further monitoring of biofuel demand growth and its impact on food prices and deforestation will be crucial.

03The long-term role of biofuels in achieving net-zero emissions targets will be debated.

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Cadence

CME Headlines

How It Developed

Interest in biofuels grew in 2024, driven by green transition goals and decarbonization needs.

The IEA projected significant biofuel use increase by 2030, with a greater share from waste and non-food crops.

By late 2024, 43 projects were expected by 2030, with oil majors committing to biofuel production, especially sustainable aviation fuel.

Interest in biofuels waned in 2025 as companies backtracked on green targets.

The OECD projected slower global biofuel use growth of 0.9% annually over the next decade.

Interest in biofuels revived in 2026 due to fossil fuel price volatility and energy shortages caused by the U.S.-Israeli war on Iran and Strait of Hormuz closure.

Crude prices rose approximately 30% between February and April, while corn prices increased by 5%.

Vietnam announced plans to switch to ethanol-blended gasoline, and Indonesia increased its mandatory biodiesel blending rate.

Sources

Asia Bets on Biofuels to Dodge Middle East Oil ShortagesOilPrice.com