As the Iran war sends oil and gas prices surging, the case for alternative fuels is getting stronger.
Rising oil costs have narrowed the premium for biodiesel feedstocks over traditional, fossil alternatives, improving biofuel production margins. “This helps reduce reliance on policy-driven support mechanisms and could lead to additional biofuel production,” said Jack Larimer, a principal analyst at S&P Global Energy. Many current biofuel mandates trace their origins to the 1970s energy shock, while the US Energy Independence and Security Act followed a 2007-08 price spike, said Dr Timothy Deehan, a senior oil analyst at LSEG. Indonesia is now weighing a revival of its stalled B50 biodiesel mix programme, India is on track to accelerate its ethanol blending push, and the Environmental Protection Agency’s decision on US renewable fuel obligations is expected by month’s end.
Sustainable aviation fuel has similarly gained momentum as the price gap with conventional fuel has narrowed. But the effect may be temporary. “Oil prices inevitably go down again, and historically this effect is not material to driving long-term investment into sustainable fuel,” said Conor Madigan, CEO at Aether Fuels, a sustainable fuels technology company. But oil shocks still serve as a reminder of the risks inherent to fossil fuel dependency, which can ultimately serve the alternative fuels industry by encouraging diversified energy supplies, he said: “With such geopolitical conflicts unfortunately becoming more commonplace, this effect is starting to have an impact.”
