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)
Rising Gasoline Prices Bolster Biofuels Under Revised EPA Policies (Inside EPA)
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)

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

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