PALMOILMAGAZINE, KUALA LUMPUR – The global biofuel industry is facing a major challenge as the collection of used cooking oil and waste oils slows down in 2024. This is expected to create a growing supply deficit in 2025 and 2026, according to Artem Hammerschmidt, Head of Vegoils and Biofuels Research at Ceras Analytics. He presented these insights at the 36th Palm and Lauric Oils Price Outlook Conference in Kuala Lumpur on February 26, 2025.
Hammerschmidt emphasized that policy remains the key driver of both biofuel demand and global production. Ambitious decarbonization targets, particularly in Europe, Indonesia, and the United States, have fueled increasing demand for biodiesel, renewable diesel (HVO), and sustainable aviation fuel (SAF), which is projected to rise by 8 million tons between 2025 and 2026.
Europe: Heavy Reliance on Waste Oils
In the UK and Europe, the demand for biofuels in the aviation and maritime sectors has surged. Strict policies mandate that only waste-based and advanced feedstocks be used for SAF and maritime biodiesel/HVO production. The total demand for biodiesel, HVO, and SAF across land, air, and sea transport is projected to grow by 2.5 million tons this year, with an additional 1.3 million tons needed by 2026.
However, this rapid demand growth raises a critical question: can Europe secure enough waste oil to meet its needs? Meanwhile, increasing HVO/SAF imports have offset much of the decline in biodiesel entering the European market.
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At the same time, changes in U.S. subsidy policies have impacted the competitiveness of European biodiesel in the American market. European biodiesel/HVO/SAF production is expected to rise by 2.1 million tons in 2025, followed by another 0.7 million tons in 2026.
United States: Impact of Subsidy Reforms
The shift from a blender’s subsidy to a producer’s subsidy in January 2025 has shaken the U.S. biofuel sector. Biodiesel production is projected to drop by as much as 15% in the first quarter of 2025, while imports plummeted in January and February.
This production decline has driven up Renewable Identification Number (RIN) prices, even as production margins begin to recover from early 2025 lows. By the end of 2025, U.S. RIN stocks are expected to turn negative and decline further in 2026, likely pushing RIN prices even higher in the coming months.
Additionally, future U.S. energy policies—especially if there is a change in administration—could significantly impact the biofuel industry. Biodiesel/HVO/SAF production is forecasted to rebound from a 0.1 million-ton decline in 2025 to a 1.6 million-ton increase in 2026.
Demand for soybean oil and used cooking oil as feedstocks is also expected to rise sharply, potentially driving up soybean oil prices—especially if the U.S. imposes stricter restrictions on vegetable oil and fat imports.
With rising global biofuel demand and tightening feedstock supplies, the industry faces a major challenge in balancing production growth with sustainable raw material availability. Countries with ambitious decarbonization goals must explore innovative waste oil management strategies and diversify their feedstock sources to meet clean energy targets without compromising environmental sustainability. (P2)
