Report Highlights Increased Role of Canola in Biofuel Future

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April 16, 2026

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(Plains Producer) A new report has highlighted the key role canola could play as a biofuel in future energy transition and fuel security for Australia.

The report, ‘Fuelling the future: How the new biofuel demand wave could reshape Australia’s canola sector’, by Rabobank, states – with the uptake of electric vehicles largely confined to passenger transport and having limited impact on diesel and jet fuel usage – biofuels are increasingly being turned to globally to help reduce emissions in these “harder to abate” sectors.

With canola oil a key feedstock used in the production of biodiesel, this means the role of Australian canola in energy markets could grow.

The report, by the bank’s RaboResearch division, says the rising demand for renewable diesel and sustainable aviation fuel (SAF) – particularly across the Asia Pacific region – is opening a “rare strategic window” for Australia to capture greater value from its canola crop.

Report lead author, RaboResearch senior grains and oilseeds analyst Vitor Pistoia, said diesel and jet fuel remained central to freight, mining and aviation, and these were key sectors where biofuels are gaining traction as a lower emissions alternative.

“For Australia, this creates a genuine opportunity to rethink how canola fits into both our agricultural system and our energy system,” he said.

The report said Australia currently exported around six million tonnes of canola seed each year, most of it unprocessed.

“Converted into renewable diesel, that volume would equate to more than two billion litres of fuel,” it said.

“By comparison, Australia imports more than 30 billion litres of diesel annually,” Mr Pistoia said, highlighting what RaboResearch describes as a significant “value-add imbalance”.

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The report said there are two broad pathways for Australia’s canola industry – expanding domestic crushing and either refining domestically or increasing exports of canola oil to overseas biofuel refineries.

“Local processing could allow Australia to capture more value across the supply chain, while improving utilisation of co-products such as canola meal,” it said.

The report cautioned that outcomes would depend heavily on policy settings, energy prices, logistics and capital costs.

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Mr Pistoia said the current oil supply shock created by the Middle East conflict had potential implications for biofuel markets.

“Reduced energy exports from Persian Gulf countries caused by the current conflict have sharpened attention on energy security and the reliance on imported liquid fuels,” he said. READ MORE

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Excerpt from Rabobank: Shifting global regulations and rising Asia‑Pacific demand are redefining vegetable‑oil markets for the decade ahead.

Rising biofuel demand may position canola for potential growth

What this means for grain producers: Transport fuel demand has remained resilient in recent years, with EV sales largely confined to passenger vehicles and therefore having limited impact on diesel and jet fuel use. As biofuels are increasingly considered among the solutions for hard‑to‑abate transport sectors, canola’s role in energy markets could rise. This could contribute to a more diversified demand base for canola, which may support longer‑term price resilience relative to scenarios without additional biofuel demand, and may influence its role in crop rotations as Australia seeks to capture more value from the energy transition.
How grain traders can benefit: Australia currently exports more than six million tonnes of canola seed each year – equivalent to over two billion litres of renewable diesel – while Australia and New Zealand together import more than 36 billion litres of diesel annually. This imbalance highlights a potential opportunity to add value to Australian supply chains. As Asia‑Pacific biofuel capacity expands and European rules tighten on crop‑based fuels, trade flows may pivot from seed toward oil, increasing the importance of traceability and consistent feedstock supply to emerging fuel markets.
What can change for canola crushers: Against the backdrop of a global biofuel surge and rapidly expanding Asia‑Pacific refining capacity, the relative value and importance of canola oil – rather than seed – is increasing in global markets. This shift could strengthen the underlying economics of canola crushing, as demand increasingly favours processed oil over raw exports. A more consistent pull for vegetable oil may support improved crushing margins and asset utilisation in some market conditions, though outcomes will depend on seed costs, energy prices, logistics, policy settings and by‑product values.
What is next for fuel producers: While EV uptake is reshaping petrol demand, diesel and jet fuel are projected in several outlooks to remain comparatively resilient. Canola oil aligns well with a rising Asia‑Pacific biofuel industry, and Australia’s geographical proximity may reduce freight time/costs relative to some origins, such as Western Hemisphere suppliers of vegetable oil. As regional mandates, blending targets and carbon frameworks evolve, market participants with secured supply may be less exposed to certain market disruptions, although they remain subject to price, policy, certification and counterparty risks.
Middle East conflict has potential implications for biofuel markets: Reduced energy exports from Persian Gulf countries caused by the current conflict have sharpened attention on energy security and the reliance on imported liquid fuels. While impacts are still emerging, such conditions reinforce policy support for alternative fuels, potentially accelerating biofuel policy implementation and investment in lagging markets such as Australia and New Zealand. READ MORE