Interest in developing biofuels has fluctuated and has been strongly driven by global energy trends. In 2024, following the COVID-19 pandemic, the international call for a green transition, and the increased focus on developing cleaner fuels to decarbonise hard-to-abate industries, interest in biofuels grew. Biofuels were expected to play a major role in the global green transition by helping to decarbonise industries that could not simply shift to renewable electricity, such as aviation. However, this interest waned in 2025, as several companies backtracked on their green energy targets.
Biofuels are produced by heating biomass feedstocks (plant materials) rapidly at high temperatures (500°C-700°C) in an oxygen-free environment or by using gasification, hydrothermal liquefaction, or low-temperature deconstruction. Ethanol and biodiesel are the two most widely used biofuels, although other feedstocks can be used to produce alternative biofuels. Typical feedstocks include sugar cane, corn, and soybeans, most of which produce low-carbon fuels that can be used in existing engines.
In 2024, the International Energy Agency (IEA) said it expected the use of biofuels to increase significantly by 2030, with a much larger proportion of these fuels produced from waste, residues, and non-food crops, thereby making them more sustainable. The demand for biofuel rose to 4.3 exajoules (EJ) in 2022, thereby surpassing pre-pandemic levels. The IEA suggested that to meet net-zero emissions targets by 2050, global biofuel production would need to increase to 10 EJ by 2030.
By the end of 2024, there were 43 projects expected to be operational by 2030, according to Rystad Energy, with oil and gas firms such as ExxonMobil, Chevron, BP, Shell, TotalEnergies, and Shell all committing to biofuel production. Many of these projects focused on sustainable aviation fuel (SAF) production, as governments worldwide put increasing pressure on the aviation industry to decarbonise. However, by 2025, interest in biofuels had begun to wane.
In late 2025, the OECD said it expected global biofuel use to increase by 0.9 per cent per year over the coming decade, which was much lower than the 3.3 per cent annual growth seen in previous years. The OECD anticipated that biofuel growth would slow in high-income countries due to stagnating fuel demand resulting from electric vehicle adoption and weaker policy support, although continued demand growth in middle-income countries was expected to offset the slowdown.
In 2026, interest in biofuels is reviving, driven by the significant price volatility of fossil fuels. The U.S.-Israeli war on Iran and the resulting closure of the Strait of Hormuz, a key energy trade corridor, have led to energy shortages and driven oil prices sharply higher in recent months, prompting many governments and energy companies to consider investing in alternative fuel production to counter the shortages.
Between February and April, crude prices rose by around 30 per cent. Meanwhile, the price of corn increased by just 5 per cent over that period. Biofuels are typically blended into gasoline or used to replace diesel, making fuel more economical when crude prices are high. Several countries have addressed shortages and high prices by introducing measures such as fuel rationing and shorter workweeks, as well as by increasing their biofuel use.
Countries across Asia, which are heavily reliant on oil imports from the Middle East, have invested in increasing biofuel production since the beginning of the war. In late March, Vietnam announced plans to switch fully to ethanol-blended gasoline, produced using sugarcane, from April due to high crude prices. Meanwhile, Indonesia said it would increase the mandatory blending rate for biodiesel made from palm oil to 50 per cent from 40 per cent. Brazil and Thailand have also increased their biofuel use in recent months.
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A biofuels analyst from data and analytics company Kpler, Beata Wojtkowska, explained, “In Asia, countries do look at biofuels that can be produced from locally sourced feedstocks, as they can reach two goals at once - limit energy imports and increase profitability for farmers.” However, while biofuel use has increased in Asia, Europe has been more reluctant to increase its biofuel production, citing concerns that excessive use could raise both food prices and deforestation rates.
The energy and climate director at the think tank Transport & Environment (T&E), Kädi Ristkok, warned that increasing reliance on biofuels could exacerbate geopolitical challenges. “Governments are playing a dangerous game by promoting food for fuel. Leaders are understandably trying to find solutions to the current oil crisis, but biofuels can never play more than a marginal role in our energy system without devastating consequences. The unintended impacts on food prices and the environment are enormous,” explained Ristkok. T&E estimates that the demand for biofuels could increase by up to 70 per cent by 2030 if the global oil supply remains constrained.
Investment in the expansion of the biofuel industry has fluctuated in line with global energy and environmental trends in recent years. However, limits to the world’s crude supply and higher fossil fuel prices have once again driven interest in alternative fuels. While this could help reduce reliance on the constrained oil supply, it could also lead to food shortages if not properly managed.
By Haley Zaremba for Oilprice.com
