Rising oil prices following the U.S.–Israeli conflict with Iran are renewing global interest in biofuels, as concerns about fuel supply disruptions begin to outweigh longstanding debates over food versus fuel.
The conflict has significantly impacted global energy flows, with roughly 20% of the world’s oil and gas typically moving through the Strait of Hormuz—an area now heavily affected by the situation. Since late February, crude oil prices have climbed by more than 30%, while corn prices—one of the primary inputs for biofuels—have increased by only about 5%.
Biofuels, produced from organic materials, are commonly blended with gasoline or used as a substitute for diesel. As petroleum prices rise, these fuels often become more economically attractive. In addition to helping stabilize fuel costs for consumers, they can also reduce reliance on imported oil.
This dynamic is especially relevant in Asia, where many countries depend heavily on Middle Eastern energy supplies. The region accounts for roughly 80% of the oil transported through the Strait of Hormuz, and recent disruptions have prompted governments to accelerate biofuel adoption. Vietnam, for example, announced it would move entirely to ethanol-blended gasoline starting in April—earlier than its previously planned June timeline. Ethanol is typically derived from crops like corn or sugarcane.
Indonesia has also taken steps to expand its biofuel use, increasing its biodiesel blending mandate from 40% to 50%. The country, a leading global producer of palm oil, relies on that feedstock for biodiesel production. Analysts note that domestically produced biofuels can help nations simultaneously reduce energy imports and support local agricultural sectors.
To manage the economic strain of rising energy costs, several Asian countries are also implementing measures such as fuel rationing, reduced workweeks, and driving restrictions. At the same time, expectations are growing that the current crisis will provide momentum for the biofuels industry. Countries like India and Thailand are exploring expanded ethanol blending as part of their response.
The renewed focus on biofuels has revived discussion around the “food versus fuel” debate, which gained prominence during the 2007–2008 global food price crisis. Critics have historically argued that diverting crops to fuel production can contribute to higher food prices. Today, a significant share of agricultural output is used for biofuels—roughly 40% of U.S. corn goes toward ethanol production, while Brazil directs about half of its sugarcane crop to the same purpose.
Global food prices have already been pushed upward by higher energy, transportation, and fertilizer costs, reaching a six-month high in March. While increased biofuel demand could add further pressure, some analysts suggest that major price impacts would likely require large-scale expansion of biofuel production capacity—a process that would take years.
Additionally, current supplies of grains and vegetable oils remain relatively strong, which has kept concerns about food competition more muted than in past crises. Biofuels still represent a small share of global energy use, accounting for about 4% of transportation fuel demand. Projections suggest this could rise modestly to around 5% by 2035.
Constraints such as infrastructure limitations, blending caps, and feedstock availability are expected to limit rapid expansion. As a result, while biofuels can help ease fuel costs, their ability to offset large-scale energy shortages remains limited.
Europe stands apart from this broader trend. The European Union maintains caps on certain biofuels due to concerns about food price impacts and deforestation, even as it pursues broader goals of reducing fossil fuel dependence.
Meanwhile, other major economies are moving in the opposite direction. In the United States, federal policy is driving increased biofuel blending requirements, while Brazil is considering raising its ethanol blend from 30% to 32% by mid-year. Brazilian producers are also shifting more sugarcane toward ethanol production, reflecting stronger profitability compared to sugar.
Overall, the current energy landscape is reinforcing biofuels as a strategic tool for energy security and price stability, even as longstanding debates about their broader impacts continue.
Adapted from an article originally shared by Reuters. Image Credit: iStock by Getty Images – Scharfsinn86