Biofuels surge links transport policy to rising food inflation

Transport & Environment said biofuel consumption could rise 30% in 2026 and 70% by 2030, a jump that is tightening the link between transport policy and food inflation. The June 5 assessment warned that crude’s latest price spike has pushed governments back toward blending mandates just as vegetable oils have climbed to a post-2022 peak and food-commodity prices have risen for three straight months.

The pressure is showing up in the feedstock market first. Transport & Environment said higher biofuel targets are pulling vegetable oils, sugar and corn away from food use, while the Food and Agriculture Organization of the United Nations said in April that all three oilcrops indices strengthened, with the vegetable oil price index rising sharply and staying above year-earlier levels. That leaves biodiesel, renewable diesel and sustainable aviation fuel producers competing for the same finite pool of rapeseed, soybean oil, palm oil and waste oils and fats, while fuel prices do not always reset as quickly as feedstock costs.

The policy push is broadening the squeeze. The U.S. Environmental Protection Agency finalized Renewable Fuel Standard volumes for 2026 and 2027 on March 27, including a rule that reallocates 70% of small refinery exemptions granted for 2023 through 2025 and partially waives the 2025 cellulosic biofuel volume requirement. EPA said the final rule supports American corn and soybean growers, oilseed processors, and biodiesel and renewable diesel producers, but it also extends the mandate’s pull on agricultural supply.

Indonesia and Brazil are moving in the same direction. Indonesia’s B40 biodiesel mandate took effect on January 1, 2025, and the government has reiterated plans to move to B50 in 2026, while a separate report said B40 alone could consume about 15.6 million kiloliters of crude palm oil and divert nearly 2 million tons from export markets. Brazil raised its mandatory ethanol blend in gasoline from 27% to 30% and biodiesel in diesel from 14% to 15% in June 2025, as the National Energy Policy Council backed a broader energy-security push.

Thailand is also building demand into its fuel system, even as it trims some road-fuel targets. Its proposed National Energy Plan lowered on-road biofuel consumption targets but set a sustainable aviation fuel target from 2026, with SAF mandated at 1% in 2026 and 8% by 2036. The International Energy Agency has likewise projected continued strong biofuel growth through 2028 and upward revisions through 2030, underscoring that the market is moving into a larger, more inflationary phase where governments, not just refiners, will have to confront who pays for the transition.