It’s time to escape the doom loop – and biofuels can help

Another oil shock? It’s time to escape the doom loop – and biofuels can help

The oil crisis triggered by the conflict in Iran is the second within five years and the sixth in a series dating back to the Yom Kippur war of 1973.

Each time it happens, oil prices spike, pushing up inflation and rattling the global economy. However with the closure of the Strait of Hormuz, through which almost a fifth of the world’s oil supply passes, the latest crisis is unprecedented. According to the asset manager Carlyle, it will be the largest ever simultaneous shock to global commodity supply chains, impacting not just the cost of the fuel we put in our tank but the cost of everything we consume day to day.

Perhaps what has been most striking this time is the asymmetric nature of the threat – the recognition that even mighty warships cannot safeguard shipping against risks such as mines, drones or mobile missile launchers.

As a result of the crisis, governments worldwide are looking afresh at alternative energy options – but the priority now is energy security rather than sustainability. The UK and Europe have already made great progress in their uptake of wind and solar power. In 2024 renewable energy accounted for over half of the UK’s total electricity generation for the first time, with under 32% coming from fossil fuels.

 

The need for liquid fuel

 

However, transportation of all types still relies largely on liquid fuels. While fully electric cars account for almost a quarter of new UK registrations, they only make up around 5.5% of all cars. There are still 32 million cars on the road that run off petrol and diesel, and for heavy-duty vehicles, the use of electric is far less common because of the challenges of incorporating bulky batteries.

Meanwhile aviation is dependent on liquid fuel and will remain so for the foreseeable future – and with 50% of Europe’s aviation fuel coming from the Gulf, most of it via the Strait of Hormuz, the industry is particularly badly exposed. Any disruption has a disproportionate effect on pricing and can easily bring global air traffic to a halt.

Clearly, we need to find other fuel sources. While there has been talk of supporting North Sea oil production, the reserves are in decline. Nor would it supply us with specialist aviation fuel or shield us from price shocks. A rise in global oil prices would still push up prices at the pumps – as consumers in the US, which is self-sufficient in oil, have found to their cost.

 

Building resilience through biofuels

 

The truth is that biofuels including sustainable aviation fuel (SAF) can play a key role in weaning us off our dependence on imported liquid fuels. Biofuel already makes up 10% of the standard petrol and 7% of diesel we buy at the pumps, and there is talk of increasing the proportion. Meanwhile governments are putting in place targets which require aviation fuel to include an increasing proportion of SAF – the UK’s SAF mandate started at 2% in 2025, rising to 10% in 2030 and 22% in 2040.

So, demand for SAF will only increase, but the next few years will be pivotal for the biofuels industry, which is facing a number of challenges. The support of policymakers and investors will be critical to secure its future – and build energy supply resilience.

 

The three key challenges

 

Firstly, SAF costs more than fossil oil-based jet fuel – so it’s key to scale up the new production technologies so we can bring the costs down over time. This will help the UK to build its own domestic industry that can compete on the world stage. While demand is being driven by the SAF mandates in the UK and Europe, right now many of the larger SAF plants are being built in Asia. There is a danger of swapping reliance on Gulf oil with imported SAF.

Secondly, much of the current supply of biofuels comes from waste vegetable oil and fats, such as used cooking oil, of which there is inevitably a limited supply. This won’t be enough to meet the growing demand after 2030, and the industry will need to draw on other feedstocks.

Fortunately, there is a whole range of and new and exciting technologies – such as Nova Pangaea’s – that allow us to use other widely available materials, such as waste biomass and agricultural residues. It’s key we now progress projects and secure the investment for production plants that diversify the feedstocks we use to make SAF.

Thirdly, regulatory policies are key to supporting demand and also the supply of SAF.  SAF policy needs to strike a balance between reducing emissions, creating jobs and economic value, and supply security. Whilst there are calls for policy adjustments, it’s key that they reinforce investor confidence in building up SAF supply.

 

By addressing these challenges we will ‘turn the tanker’ and build a more resilient, sustainable and affordable energy supply system.

 

The closure of the Gulf of Hormuz is the latest in a series of energy shocks but it will not be the last – particularly now that Iran has shown the world the power of weaponising supply chains.

It’s time to escape the doom loop. To paraphrase Winston Churchill, this is a crisis we must not let go to waste.