Strait to the Point: The Impact of the Strait of Hormuz Crisis on the Bio-Economy

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April 03, 2026

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by Oliver Booth (Biofuels Digest) ... The Strait of Hormuz crisis is actively rewriting the playbook for the global bio-economy, serving as the strongest argument for domestically produced clean fuels since the 1973 Arab oil embargo. What was previously framed largely as a climate and decarbonization initiative has overnight morphed into an urgent national security mandate. Every barrel of biofuel or renewable diesel produced from domestic feedstocks is a barrel that does not need to transit a chokepoint. In a political context where “energy dominance” is the framing of choice, clean fuels now fit the narrative perfectly.

The Erasure of the Green Premium

In the short term, the surge in crude oil prices is rapidly narrowing the traditional “green premium”—the cost gap between fossil fuels and clean alternatives.

At $90–100/bbl Brent, conventional diesel translates to roughly $3.50–4.50/gal. By comparison, renewable diesel typically costs between 4.50 and $5.00/gal to produce. When producers stack existing policy incentives—such as federal RFS D4 RINs (valued at $\sim$ $0.70/gal$), California’s Low Carbon Fuel Standard (LCFS) credits ($\sim 0.35–0.50/gal), and the forthcoming 45Z tax credit—incentive-adjusted renewable diesel can close 1.50–2.00+/gal of that gap.

At these prices, renewable diesel approaches parity in California and Brazil, where imported diesel prices have actually surpassed contracts for biodiesel. Similarly, the historically steep multiple for Sustainable Aviation Fuel (SAF), which typically trades at 2–3x Jet A, becomes far less extreme when jet fuel prices are themselves surging. If these levels hold for more than a few weeks, expect real capital to move into domestic projects.

The UCO Bottleneck and Europe’s Vulnerability

Despite these tailwinds, not all clean fuel pathways are insulated from the shipping crisis. Producers heavily dependent on imported Used Cooking Oil (UCO) for SAF and renewable diesel are the immediate losers of this disruption. Europe is exceptionally exposed to this vulnerability, importing more than 80% of its UCO, most of which moves by sea.

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The rerouting of vessels around the Cape of Good Hope to avoid the conflict zone adds approximately 3,500 nautical miles and 10 to 14 days to transit times, layering massive freight and insurance costs on top of a market that is already structurally tightening.

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The EU’s ReFuelEU Aviation mandate (requiring 2% SAF from 2025, rising to 6% by 2030) does not change, but compliance becomes dramatically more expensive.

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The ethanol-to-SAF, or Alcohol-to-Jet (AtJ), pathway is receiving a massive strategic tailwind as UCO-based feedstock costs spike.

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Furthermore, US gasoline at 3.58/gal improves the economics for E15 and E85 blending, with groups like the Renewable Fuels Association already calling for year-round E15 in response to the crisis.

Capital Flight and the Stalling of Gulf Megaprojects

The crisis is also redrawing the map for the future of the hydrogen and ammonia sectors. Before the closure, Saudi Arabia, the UAE, and Oman were positioning themselves as the anchor producers for the emerging green hydrogen and ammonia export economy. These Gulf-anchored projects were intended to bring large-scale capacity online to serve as future marine fuels and industrial exports.

That momentum has been instantly checked. Drone strikes have already hit Oman’s ports at Duqm and Salalah, and Sohar now falls within the expanded war-risk insurance zone.

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A Structural Shift for the Future

The maritime shipping industry—the sector most physically impacted by the Strait’s closure—is currently forced to push its decarbonization goals aside. The International Maritime Organization’s (IMO) Net-Zero Framework was already stalled before the crisis. Now, with the industry managing reroutes, absorbing insurance costs, and dealing with stranded vessels, the political appetite for a global carbon tax on shipping is near zero. In a prolonged scenario, the framework may be considered “dead this cycle”.

Yet, the crisis makes the strategic case for alternative marine fuels undeniable: ships running on fossil fuel from Gulf chokepoints are the ones most exposed to these geopolitical shocks. The 2026 Hormuz crisis is transforming clean fuels from environmental targets into critical security infrastructure. Just as the 1973 embargo birthed the IEA, strategic petroleum reserves, and fuel economy standards, this disruption could do the same for clean fuels.

The ingredients are now all in place: bipartisan support for biofuels in the US, SAF mandates in the EU, and a shipping industry that has just learned exactly what fossil-fuel chokepoint dependence costs. The global market is receiving a harsh, fact-forward lesson: in an era defined by unpredictable geopolitical chokeholds, the most valuable fuel is the one synthesized securely within your own borders

Digest note: Oliver Booth’s complete Strait to the Point update and Sightline Q1 Outlook can be accessed here and here. READ MORE

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Trump promoted fossil fuels. His war is pushing the world away from them. (E&E News Climatewire)
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Pritzker calls for year-round E15 gasoline in letter to Congress: Governor says war in Iran has elevated urgency for cheaper, higher-ethanol fuel (ShawLocal)
Gov. Pritzker Urges Congress to Provide Long-Term Market Certainty to Illinois Farmers (Office of Governor JB Pritzker (D-IL))
Iran War Oil Market Turmoil is Quietly Supercharging Biofuel Profit (ResourceWise)
Middle East conflict fuels biodiesel-driven palm oil demand (Biofuels International)
Biofuels are advancing to reduce dependence on oil. (CNN Brazil (Google Translation))
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What is E15 gas and why does Gov. Pritzker want more of it? (Fox 32/The Chicago Report; includes VIDEO)
E15 supporters say Iran War emphasizes need for permanent, year-round access (DRG Media Group News; includes AUDIO)

Excerpt from E&E News Climatewire: As oil prices spike, governments are slashing fuel use and eyeing renewables — threatening to erode global demand for fossil energy.

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The crisis has the potential to boomerang on Trump, driving countries away from fossil fuels and into the arms of cleaner technologies the president scorns.

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South Korean President Lee Jae Myung called for a rapid shift to renewable energy this week, saying, “Our future will be at serious risk if we continue to rely on fossil fuels.”

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“If anything, the ongoing military operations have actually underscored the importance of domestically producing reliable, affordable, and secure energy,” (Washington spokesperson Taylor) Rogers said. “Many of our allies that have tried transitioning to intermittent and unreliable renewable energy sources have predictably failed to break their reliance on foreign oil that goes through the Strait.” READ MORE

Excerpt from Inside EPA: Responding to rising gasoline prices from the Iran war has emerged as a policy priority for the Trump administration, with EPA seeking to expand fuel supplies by increasing blending requirements under the renewable fuel standard (RFS) and allow summertime sales of E15 to benefit biofuel producers. But those moves have stoked oil refinery concerns about market distortions that would harm consumers, while ethanol producers are urging Congress to go further in approving legislation that would allow year-round sales of E15... READ MORE

Excerpt from ShawLocal: In a letter to members of the Congressional Committee on Energy and Commerce obtained by Capitol News Illinois, Pritzker argued that year-round E15 would help spur domestic energy production and stabilize fuel markets.

“I respectfully urge you to support legislation that ensures the permanent, nationwide availability of year-round E15,” Pritzker wrote, adding, “doing so would provide certainty to the market, strengthen rural economies, and reinforce America’s commitment to domestic energy production.”

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The governor also pointed to broader economic pressures on the agricultural sector, including the ongoing war in Iran, as a reason for already higher gas prices. According to AAA, gas prices eclipsed $4 per gallon across the country this week for the first time since 2022. READ MORE

Excerpt from ResourceWise: Energy Security Bringing Biofuels Back Into Focus

Beyond short-term pricing effects, the crisis may also have broader policy implications.

Countries heavily reliant on imported fossil fuels are already reconsidering their energy strategies. Brazil and Indonesia, for example, have recently doubled down on biofuel mandates to reduce dependence on volatile global fuel markets.

Similar discussions are now emerging in the United States.

The Renewable Fuels Association (RFA) has urged the Trump administration to accelerate approval of nationwide E15 gasoline, arguing it could help ease rising fuel prices.

For diesel markets, the argument may increasingly shift toward fuel security. Expanding support for biofuels, especially renewable diesel, could align with the broader US Energy Dominance strategy. Recent executive actions have already recognized the importance of green diesel in the country's energy future.

A Market Opportunity for Renewable Fuels

For now, the biofuels industry is experiencing an unexpected tailwind.

A rally in fossil fuel prices driven by geopolitical risk rather than renewable market fundamentals has quickly transformed margins for biodiesel and renewable diesel producers. Whether this boost proves temporary or marks the start of a longer-term shift will depend on how oil markets evolve in the coming months.

But one thing is clear: in times of energy disruption, biofuels are once again stepping into the conversation… not just as a climate solution, but as a strategic energy asset. READ MORE

Excerpt from Biofuels International: The escalating conflict in the Middle East has pushed crude oil prices sharply higher, with some benchmarks rising more than 25% and surpassing levels last seen in mid‑2022.

This spike in energy costs is reshaping the economics of alternative fuels. As crude becomes more expensive, biodiesel producers are turning to palm oil, which is currently trading at a significant discount to gasoil, making it a more cost‑effective feedstock.

Higher freight rates are also influencing buying patterns.

Asian importers, facing rising shipping costs, are seeking quicker shipments of vegetable oils, further supporting demand for palm oil. At the same time, Indonesia and Malaysia—responsible for the bulk of global supply — have seen production climb to record highs, leaving inventories elevated and prices under pressure.

The conflict has effectively reversed that trend, lifting palm oil prices to their highest in more than a year.

Policy shifts may add further momentum. Indonesia is considering reviving its B50 biodiesel mandate, a move that would significantly increase domestic consumption and tighten global supply. READ MORE

Excerpt from CNN Brazil (Google Translation): Increasing blends of ethanol and biodiesel reveal energy and agricultural strategies in several countries.

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In the diesel sector, the most ambitious initiative currently underway is in Indonesia. The country operates with a mandatory blend of approximately 40% biodiesel (B40) and is discussing raising this proportion to B50, in a program primarily based on the use of palm oil. The policy aims to reduce diesel imports and increase the added value of local agricultural production.

In the United States, the strategy is different. The country uses more moderate blends of biodiesel—typically between B5 and B20—but on a large scale.

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In South America, Colombia uses a blend close to B10 in its diesel fuel. Argentina, in turn, maintains a mandate of approximately B7.5, with recurring debates about the possibility of increasing the percentage in the future, in line with the weight of the soybean complex in its economy.

Thailand follows a more moderate model. The diesel sold in the country typically uses around 7% biodiesel (B7), although higher blends, such as B20, exist, mainly intended for commercial fleets. Thai energy policy seeks to balance the use of biodiesel produced from palm oil with the need to avoid excessive pressure on fuel prices.

In the case of gasoline, ethanol plays a central role in several markets. Paraguay is among the countries with the highest share of biofuel in the blend, with levels close to 30% ethanol in gasoline. In Argentina, the national mandate is around 12%.

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In Sweden and the United States, standard gasoline contains about 10% ethanol (E10), while flex-fuel vehicles can use fuels with up to 85% ethanol (E85).

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In Asia, India has been rapidly expanding its national ethanol program . The country recently reached its target of approximately 20% ethanol in gasoline, following strong growth in domestic production based on sugarcane and grains.

Brazil occupies a unique position in this scenario. The gasoline sold in the country currently contains 30% anhydrous ethanol (E30), one of the highest percentages in the world, while diesel incorporates 15% biodiesel (B15). The widespread presence of flex-fuel vehicles—capable of also operating on hydrated ethanol—further expands the share of biofuels in transportation energy consumption. Policies such as RenovaBio reinforce this role by creating market incentives for emission reduction. READ MORE

Excerpt from World Bio Market Insights: This energy crisis is also a raw materials crisis. Petroleum derivatives are vital feedstocks for chemicals, materials, and agricultural fertiliser.

With price rises and shortages, Asian and European producers are either shuttering production, passing costs onto consumers, or waiting for the inflationary hit to come.

Renewable alternatives have a role to play in mitigating these economic shocks.

This is because almost every consumer product made from oil can also be made from biological raw materials, including farming and household waste.

The bio-based price premium

So far, bio-based materials and chemicals have made up just a tiny fraction of global supply. There are two main reasons why the industry remains overwhelmingly reliant on petroleum feedstocks.

First, bio-based feedstocks have been more expensive than their petroleum equivalents. The oil industry keeps costs down thanks to government subsidies, infrastructure investments, and a century’s worth of efficiency-maximising engineering.

This leads onto the second, more fundamental reason why biomass remains under-utilised by industry: bio-based producers still lack the strong policy support that would level the playing field between renewable and petroleum feedstocks.

Oil’s cost advantage is eroding

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Bio-based plastic feedstock

After petrol and gasoline, plastics will be among the first commodities to be hit by price increases.

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Clothing fibre

Most clothing fibres are made from oil plastics.

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Fertiliser

Fertiliser is one of the clearest illustrations of our global fossil dependence.

Synthetic nitrogen depends on natural gas, which accounts for roughly 34% of total production costs. The production of urea – a type of nitrogen – is concentrated in Russia, Egypt and Saudi Arabia, and Iran.

With production facilities across the Gulf now out of action, countries are seeking bio-based alternatives.

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A perspective shift

As it stands today, bio-based feedstocks cannot substitute petroleum feedstocks one-for-one or fix the current crisis.

For one, the only sure way to stabilise global markets will be a permanent end to the war.

Second, global processing capacity in most areas of the bioeconomy is still limited. Supply chains still need policy, investment, and development.

However, bio-based supply chains can be used to give industry and consumers some inflationary relief. Renewable feedstocks can substitute for petrochemicals in vital industries, plug some of the market shortfalls, and lower overall demand for petroleum as far as possible.

Over the medium and longer-term, however, the war is likely to mark a fundamental tipping point in the shift away from fossil dependence.

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Economies particularly in the developed world are about to feel deep pain from their oil dependency. As a result, it will become increasingly difficult to make a case against investing in renewable alternatives across critical sectors.

We have historical precedent for this. The 1973 oil crisis prompted the first of Western investments into renewable energy and domestic supply security. In fact, the term energy transition was first coined during this period.

Similarly, the current moment could force governments and industry to reckon with the fragility that comes with oil dependence as the value of bio-based alternatives become clearer than ever. READ MORE

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used cooking oil (UCO)/yellow grease United Arab Emirates (UAE) Transportation Fuels Policy tax policy tax incentives shipping seaports Saudi Arabia Renewable Fuel Standard (RFS and RFS2) Renewable Diesel/Green Diesel/HVO/Paraffinic Diesel Renewable Diesel/Green Diesel price Regulations-State Regulations-Federal palm oil prices palm oil Oman oil prices natural gas prices national security Middle East market forces Marine/Maritime Bio and Renewable/Sustainable Fuel (SMF) Liquified Natural Gas (LNG) Jetfuel (Sustainable Aviation Fuel (SAF)) International Maritime Organization (IMO) Indonesia Hydrogen/Renewable Hydrogen HVO (Hydrotreated vegetable oil) gasoline price fuel prices European Union (EU) ethanol prices EPA (Environmental Protection Agency) energy security energy independence E85 price E15 price E15 defossilization carbon tax California Brazil BioRefineries/Renewable Fuel Production bioeconomy biodiesel prices biodiesel BioChemicals/Renewable Chemicals Aviation Fuel/Sustainable Aviation Fuel (SAF) aviation fuel (SAF) price ammonia alcohol-to-jet (ATJ)/ethanol-to-jet (ETJ) 45Z Clean Fuel Production Tax Credit

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