Biodiesel Price Trend and Forecast 2026-2027

Key Takeaways

• Global biodiesel prices rose steadily through 2025, climbing from USD 1.13/KG in Q1 to USD 1.27/KG in Q4 (a 12.39% gain), before easing 1.57% to USD 1.25/KG in Q1 2026. Tight vegetable oil feedstock markets, Indonesia's B40 mandate launch, tightening RED III compliance in Europe, and the US transition to the 45Z clean fuel production credit all pushed prices higher.
• Europe was the most expensive region throughout 2025, moving from USD 1.31/KG in Q1 to a peak of USD 1.49/KG in Q4 before softening to USD 1.44/KG in Q1 2026. RED III compliance obligations, EU ETS carbon pricing, tight rapeseed oil availability, and Red Sea shipping disruptions all contributed to the premium.
• South America held the second most expensive regional price point, rising from USD 1.18/KG in Q1 2025 to USD 1.34/KG in Q4 2025. Brazil's B15 mandate going into effect in March 2025 and Argentina's soybean oil export taxes tightened regional feedstock economics and lifted biodiesel prices through the year.
• North America moved more gradually, from USD 1.05/KG in Q1 2025 to USD 1.15/KG in Q1 2026. The US Inflation Reduction Act's Section 45Z Clean Fuel Production Credit replaced the blenders' tax credit in January 2025, creating early-year uncertainty that resolved as EPA issued final RFS Renewable Volume Obligations.
• North East Asia was the cheapest regional benchmark, rising from USD 0.99/KG in Q1 2025 to USD 1.09/KG in Q1 2026. Indonesian and Malaysian palm oil-based FAME remained competitive, though the B40 mandate pulled feedstock inward, tightening export availability and supporting prices.
• The biodiesel market forecast for 2026 leans cautiously firm. Mandate-driven demand keeps expanding (Indonesia B40 with B50 under discussion, EU RED III tightening, Brazil B15), while feedstock tightness in palm, soybean, and used cooking oil remains the biggest structural support. Downside risks include softer crude oil diesel prices, weaker soybean oil, and any rollback of US Section 45Z credit rates.

What Is Biodiesel and Why Does It Matter?

Biodiesel is a renewable liquid fuel made by the transesterification of vegetable oils, animal fats, or used cooking oil with methanol or ethanol. The reaction produces fatty acid methyl esters (FAME), the product commonly referred to as biodiesel, along with glycerol as a coproduct. The most common commercial grades are B100 (pure biodiesel), B20 (20% biodiesel in petroleum diesel), and lower blends. Renewable diesel, also called hydrotreated vegetable oil (HVO) or hydrogenation-derived renewable diesel (HDRD), is a related but chemically different product made by hydrogenation rather than transesterification, and it is typically priced alongside FAME biodiesel in market commentary (US Energy Information Administration; European Commission).

Biodiesel matters because it is one of the few scalable, already-deployed tools for decarbonising transport. Unlike batteries or hydrogen fuel cells, biodiesel and renewable diesel drop directly into existing diesel vehicles and infrastructure. The European Union's Renewable Energy Directive III (RED III) requires member states to achieve at least 29% renewable energy in transport by 2030, with subtargets for advanced biofuels and renewable fuels of non-biological origin. The United States administers the Renewable Fuel Standard (RFS) through the Environmental Protection Agency, setting annual Renewable Volume Obligations (RVOs) that obligated parties must meet. Indonesia's B40 mandate, launched in January 2025, requires 40% palm oil biodiesel blending in diesel fuel and is scheduled to rise to B50 by 2027 (Indonesia Ministry of Energy and Mineral Resources).

The global biodiesel and renewable diesel market produces around 65 to 70 billion litres per year, led by the United States, Indonesia, Brazil, Germany, Argentina, and France (US EIA; IEA Renewables Report). Any credible biodiesel market forecast has to track four dynamics in parallel: vegetable oil feedstock prices (palm, soybean, rapeseed, used cooking oil), regulatory mandates and subsidies, crude oil diesel prices that set the competitive alternative, and carbon intensity accounting under schemes like California's Low Carbon Fuel Standard and EU ETS.

Which Sectors Are Driving Biodiesel Demand?

Road Transport Diesel Blending: The single largest application, consuming around 70% to 75% of global biodiesel output. Highway diesel blending in Europe, the United States, Brazil, and Indonesia is mandated by regulation, which creates structurally predictable demand. US heavy-duty trucking, European commercial vehicles, and Indonesian and Brazilian light commercial vehicles are the biggest volume channels (US EIA; IEA).

Off-Road and Agricultural Diesel: Farm equipment, construction machinery, and mining vehicles consume roughly 10% to 15% of biodiesel volumes. US farmers have been meaningful early adopters, with many state and federal agricultural programmes favouring higher-blend biodiesel for field operations. European agricultural diesel consumption is similarly concentrated (USDA; European Commission).

Marine Fuel and Bunker Applications: Growing fast from a small base, particularly in Northern European shipping corridors and Singapore bunker markets. The International Maritime Organization's revised GHG strategy targets net-zero shipping by 2050, and biodiesel blends (commonly B24 and B30 marine fuels) are emerging as compliance options for the 2030 interim targets (IMO; International Bunker Industry Association).

Rail and Heating Oil: Smaller but consistent demand in European heating oil markets (Germany's Bioheat programme) and limited rail applications in the US and France. This segment is approximately 5% of global demand and grows slowly as oil-heated buildings are gradually retrofitted to heat pumps (Eurostat; European Commission).

Sustainable Aviation Fuel (SAF) Feedstock Loop: While SAF is technically a separate product, biodiesel plants in some regions (Neste's integrated operations, Diamond Green Diesel's Port Arthur facility, World Energy's Paramount plant) are increasingly being converted or upgraded to produce renewable diesel that can then be further processed into SAF. This is creating meaningful demand for feedstocks like used cooking oil and tallow that compete with traditional biodiesel (IATA; IEA Bioenergy).

Global Biodiesel Price Trend in 2025

Biodiesel had the kind of 2025 that reinforces why this product is as much about politics and agriculture as it is about energy. Global prices opened the year at USD 1.13/KG in Q1, firmed 3.54% to USD 1.17/KG in Q2, climbed 3.42% to USD 1.21/KG in Q3, gained a further 4.96% to USD 1.27/KG in Q4 (the yearly peak), and then slipped 1.57% to USD 1.25/KG in Q1 2026. That is a 12.39% cumulative rise from Q1 2025 to Q4 2025, against a broader petroleum diesel market that stayed comparatively stable.

The main driver was feedstock. Crude palm oil averaged around MYR 4,400 per tonne through 2025, up about 10% year-on-year (Malaysian Palm Oil Board). Soybean oil held up on steady US demand and Argentine export tax structures, and rapeseed oil was tight in Europe as Ukrainian supply flows stayed disrupted. Used cooking oil (UCO) and tallow prices also firmed as renewable diesel and sustainable aviation fuel producers competed for the same low-carbon-intensity feedstocks (USDA; European Commission).

On top of that, every major mandate tightened in 2025. Indonesia's B40 mandate launched in January, pulling material volumes of palm oil out of the export market and into domestic biodiesel blending (Indonesia Ministry of Energy and Mineral Resources). Brazil's B15 requirement came into effect in March 2025, raising domestic biodiesel pull meaningfully (Brazilian ANP). The EU's RED III implementation raised the renewable-in-transport obligation across member states. The US shifted from the Blenders' Tax Credit to the Section 45Z Clean Fuel Production Credit in January 2025, which initially created some Q1 pricing uncertainty before settling as EPA finalised RVOs for 2025 and 2026 (US EPA). The Q1 2026 softening reflected palm oil supplies normalising after seasonal peaks and modest destocking across European blenders.

What Were European Biodiesel Price Trends in 2025?

Europe was the most expensive biodiesel market in the world every single quarter of 2025. Prices opened at USD 1.31/KG in Q1, firmed 3.05% to USD 1.35/KG in Q2, climbed 4.44% to USD 1.41/KG in Q3, gained another 5.67% to USD 1.49/KG in Q4 (the highest regional print of any region all year), and then eased 3.36% to USD 1.44/KG in Q1 2026.

The European premium is structural. RED III sets a binding 29% renewable energy target for transport by 2030, with a subtarget of 5.5% for advanced biofuels and renewable fuels of non-biological origin (European Commission). Member state implementation raises compliance obligations annually. On top of that, EU ETS carbon allowances stayed above EUR 70 per tonne for most of 2025, adding a steady cost burden to fossil fuel supply chains and pushing obligated parties toward biofuel blending. Rapeseed oil, the dominant European feedstock, was tight throughout the year as Ukrainian supply flows remained disrupted, and biodiesel producers had to pay up for ISCC-certified material to meet traceability requirements (Eurostat; CEFIC).

European biodiesel production is concentrated among a few large players. Neste (Finland) operates the world's largest renewable diesel capacity, with facilities in Porvoo, Rotterdam, and Singapore. Verbio and CropEnergies in Germany, Saipol in France, Preem in Sweden, and Biopetrol Industries make up most of the FAME capacity. Avril Group's Sofiproteol and ADM-Cargill joint operations also contribute. The Red Sea shipping disruptions that persisted through parts of 2025 added USD 40 to USD 80 per tonne to Asian feedstock imports, which flowed directly into European biodiesel pricing (Drewry; European Commission).

The Q1 2026 ease reflected a combination of palm oil supply normalisation, slightly softer crude oil prices reducing the floor under diesel-equivalent pricing, and modest inventory destocking ahead of spring driving season. RED III obligations stay in place, though, so the structural European premium is unlikely to compress materially through 2026.

South America Biodiesel Price Trends in 2025

South America held the second most expensive regional price point throughout 2025, with biodiesel rising from USD 1.18/KG in Q1 to USD 1.24/KG in Q2 (+5.08%), USD 1.28/KG in Q3 (+3.23%), and USD 1.34/KG in Q4 (+4.69%, the regional peak), before softening 2.99% to USD 1.30/KG in Q1 2026.

Brazil dominates the regional picture. The country raised its mandatory biodiesel blend from B14 to B15 in March 2025, which added meaningful domestic demand on top of an already-tight soybean oil balance (Brazilian ANP). Brazilian biodiesel production is concentrated among Brasil Bio Fuels, Granol, BSBios, Oleoplan, ADM Brasil, Cargill, and a handful of smaller producers, with most plants sited near soybean growing regions in Rio Grande do Sul, Mato Grosso, and Goiás. The country's B15 ramp tightened the domestic balance and supported biodiesel prices well above import parity for much of the year.

Argentina, the other major regional producer, ran its biodiesel plants at reduced utilisation rates through parts of 2025 due to soybean oil export tax policy uncertainty. Argentine producers traditionally exported to Europe and the US, but US anti-dumping duties on Argentine biodiesel and weaker European arbitrage economics kept volumes limited. Paraguayan and Peruvian small-scale production rounded out the regional picture (Argentine Ministry of Economy; UN Comtrade).

The Q1 2026 ease tracked a pullback in soybean oil from late-2025 highs and slightly softer Brazilian domestic demand after the Q4 seasonal peak. Structurally, South American biodiesel should stay at a premium to North East Asia given soybean versus palm feedstock economics, but below Europe given the absence of carbon pricing and less complex regulatory overhead.

North America Biodiesel Price Trends in 2025

North American biodiesel had the most policy-driven year of any region. Prices moved from USD 1.05/KG in Q1 2025, firmed 1.90% to USD 1.07/KG in Q2, slipped 0.93% to USD 1.06/KG in Q3, jumped 7.55% to USD 1.14/KG in Q4, and inched up another 0.88% to USD 1.15/KG in Q1 2026. The Q4 2025 jump is the tell: that is when the Section 45Z Clean Fuel Production Credit finally settled into predictable pass-through and US producers were confident enough to firm prices.

The Section 45Z credit replaced the legacy Blenders' Tax Credit on 1 January 2025 and fundamentally changed biodiesel and renewable diesel economics in the US. Under 45Z, the credit value varies based on the carbon intensity of the fuel and the feedstock used, which favours producers using lower-CI feedstocks like used cooking oil, tallow, and distillers corn oil over soybean oil (US Department of the Treasury; IRS). Through Q1 and Q2 2025, uncertainty about final 45Z rules, carbon intensity methodologies, and eligibility kept producer margins compressed. Once the Treasury and EPA rule interactions became clearer mid-year, producer confidence returned.

The major North American producers include Diamond Green Diesel (a Valero and Darling Ingredients joint venture, operating the largest US renewable diesel facility in Norco, Louisiana), Marathon Petroleum's Dickinson renewable diesel facility in North Dakota, Chevron Renewable Energy Group (formerly REG), Phillips 66's Rodeo facility, Neste's US operations, and ADM's biodiesel plants. US small and mid-sized soybean-based biodiesel producers saw margin pressure through H1 2025 under the new 45Z feedstock weighting (US EIA; USDA).

US ethanol dynamics also spilled into biodiesel pricing. Low California Low Carbon Fuel Standard (LCFS) credit prices through much of 2025 reduced margin support for California-destined renewable diesel, and EPA's 2025 and 2026 RVOs set the RIN market prices at moderate levels. Canadian Clean Fuel Regulations provided an additional pull, with Canadian blenders competing for US-origin renewable diesel through the year (US EPA; Environment and Climate Change Canada).

North East Asia Biodiesel Price Trends in 2025

North East Asia was the cheapest regional biodiesel benchmark throughout 2025, but the region saw steady quarter-on-quarter price gains as Indonesian and Malaysian feedstock balances tightened. Prices moved from USD 0.99/KG in Q1 2025, up 4.04% to USD 1.03/KG in Q2, up 4.85% to USD 1.08/KG in Q3, up 1.85% to USD 1.10/KG in Q4, and down fractionally 0.91% to USD 1.09/KG in Q1 2026.

Indonesia is the central supply story. The country's B40 mandate launched on 1 January 2025, requiring 40% palm-oil-based biodiesel blending in diesel fuel, and the Indonesian government set domestic market obligations that pulled palm oil volumes out of the export market (Indonesia Ministry of Energy and Mineral Resources). Wilmar International, Musim Mas, Sinarmas, and Apical Group are the key Indonesian biodiesel producers, with integrated palm oil milling and refining upstream. The B40 launch tightened palm oil exports and supported both domestic FAME prices and CPO export prices throughout 2025 (GAPKI; Indonesia Ministry of Trade).

Malaysia runs a B20 mandate for the transport sector, with Sime Darby Plantation, IOI Corporation, KLK, and Felda's joint ventures supplying much of the biodiesel. Malaysian biodiesel pricing tracked Indonesian closely through 2025, with a modest premium reflecting Malaysian palm oil's typically tighter specifications (Malaysian Palm Oil Board). Singapore operates primarily as a trading and refining hub, with Neste's integrated Singapore renewable diesel and SAF facility running at full tilt through 2025 to supply European, Japanese, and US West Coast markets.

Japan and South Korea operate smaller biofuel blending programmes focused on compliance rather than climate leadership. Japan's METI oversees a voluntary biofuel blending target, and South Korea's renewable fuel standard applies to transport fuels with stepwise increases through the decade. Both countries are net biodiesel importers from Indonesia and Singapore, and their purchases supported Asian FAME prices through 2025 (METI Japan; Korea Ministry of Trade, Industry and Energy). The Q1 2026 mild ease reflected post-Lunar New Year destocking and slightly improved palm oil supply after the seasonal production peak.

What Factors Drove Biodiesel Costs in 2025?

• Vegetable oil feedstock prices: The single biggest driver. Feedstock typically represents 70% to 80% of biodiesel production cost. Crude palm oil averaged around MYR 4,400 per tonne in 2025, up roughly 10% year-on-year (Malaysian Palm Oil Board). Soybean oil, rapeseed oil, and used cooking oil all firmed through much of the year on tight supply and renewable diesel competition.
• Indonesia B40 mandate implementation: The launch of Indonesia's 40% palm oil biodiesel blending requirement on 1 January 2025 pulled significant palm oil volumes into domestic blending, reducing export availability and pushing up global palm oil prices. The ripple effect reached every regional biodiesel market within weeks (Indonesia Ministry of Energy and Mineral Resources).
• EU RED III implementation and compliance costs: Rising renewable-in-transport obligations under RED III, combined with tightening low carbon intensity requirements and persistent EU ETS carbon pricing above EUR 70 per tonne, kept European biodiesel prices structurally elevated (European Commission).
• US Section 45Z Clean Fuel Production Credit transition: The 1 January 2025 switch from the Blenders' Tax Credit to Section 45Z fundamentally changed US producer margin dynamics, with soybean-based FAME producers seeing margin compression early in the year while lower-carbon-intensity feedstocks like used cooking oil and tallow gained competitive advantage (US Department of the Treasury; IRS).
• Brazil's B15 mandate launch: Brazil's March 2025 increase from B14 to B15 added material domestic biodiesel demand and supported regional soybean oil prices throughout the year (Brazilian ANP).
• Used cooking oil and tallow competition from renewable diesel and SAF: Growing demand for low-carbon-intensity feedstocks from renewable diesel and sustainable aviation fuel producers intensified competition for UCO and tallow, keeping alternative feedstocks tight and supporting biodiesel pricing floors (IEA Bioenergy; IATA).
• Red Sea shipping disruptions: Houthi attacks and rerouting around the Cape of Good Hope added roughly USD 40 to USD 80 per tonne to Asia-to-Europe biodiesel and feedstock freight through much of 2025, supporting European biodiesel prices (Drewry; International Chamber of Shipping).

Biodiesel Market Forecast for 2026

The biodiesel market forecast for 2026 leans cautiously firm. Mandate-driven demand keeps expanding, feedstock tightness remains the dominant structural support, and the regulatory framework in Europe, the US, Indonesia, and Brazil continues to favour rising biofuel consumption. The downside scenarios are more about feedstock economics (palm oil, soybean oil) and crude oil diesel parity than about weak end-use demand.

The bull case: Indonesia moves from B40 toward B50, EU RED III compliance obligations continue to tighten, Brazil evaluates B20 ahead of schedule, US Section 45Z credit rates stabilise and incentivise capacity additions in renewable diesel and SAF. The bear case: palm oil supplies normalise faster than expected, soybean oil softens on a strong US 2026 crop, crude oil diesel trades lower, and rollback scenarios on the US Section 45Z credit rates create policy uncertainty. Realistically, the market likely sees prices holding near the top of the 2025 range through H1 2026, with modest softening into H2 if feedstock supplies improve.

Expected Biodiesel Price Range (2026):

Compliance buyers (obligated parties under RFS, RED III, CFR, or national mandates) should accept that forward coverage at current levels is reasonable and that 2026 probably will not deliver the price relief some of them are hoping for. Merchant buyers have a little more room, particularly in Q2 and Q3 2026 when seasonal palm oil and soybean oil production tends to improve. Producers should continue focusing on lower-carbon-intensity feedstocks to capture the full 45Z benefit in the US and RED III advanced biofuel premiums in Europe.

Key Analyst Insights for the Biodiesel Market

Biodiesel pricing has become one of the cleanest leading indicators for where global agricultural commodities, renewable fuel policy, and energy transition are intersecting. Here is what is worth tracking through 2026:

Palm oil supply discipline under the Indonesian B40 (and coming B50) mandate. Indonesian domestic market obligation (DMO) policy and export tax rates will move palm oil, which moves biodiesel globally.

US Section 45Z Clean Fuel Production Credit implementation details. Final Treasury rules on carbon intensity methodology, feedstock eligibility, and pass-through accounting will reshape US producer margins for the next three years.

European RED III member state implementation. Germany, France, Netherlands, Italy, and Spain are the key jurisdictions, and their individual implementation approaches (particularly around advanced biofuel sub-targets) will move European biodiesel differently.

Used cooking oil (UCO) and tallow competition between renewable diesel, SAF, and traditional biodiesel. The low-carbon-intensity feedstock market is rapidly bifurcating, with premiums widening for certified UCO and tallow.

Brazilian biodiesel mandate trajectory and soybean oil export tax policy. Brazil's B15 is live, and any further mandate increases would materially tighten regional soybean oil balances.

California Low Carbon Fuel Standard (LCFS) credit prices. LCFS has been one of the primary margin supporters for US West Coast renewable diesel, and credit price weakness in 2025 has been a margin headwind. Any rebound would lift biodiesel regional premiums (California Air Resources Board).

Key Takeaways for Buyers and Manufacturers

For Buyers

• Lock in compliance volumes where possible. Mandate-driven biodiesel demand is not going away, and forward coverage at current prices looks reasonable given the 2026 supply outlook. Spot reliance is risky in an environment this tight.
• Watch palm oil, soybean oil, and rapeseed oil futures closely. All three are publicly traded and serve as the best leading indicators for biodiesel price direction (Malaysian Palm Oil Board; Chicago Board of Trade; MATIF Paris).
• Diversify feedstock specifications in your supply contracts. RED III advanced biofuel premiums, US 45Z lower-CI feedstock advantages, and California LCFS carbon intensity scoring all reward producers who can supply UCO, tallow, and distillers corn oil-based biodiesel.
• Understand the regulatory stack. RFS RINs in the US, CBAM in Europe, RED III compliance obligations, ISCC certification requirements, and LCFS carbon intensity scoring all affect landed prices meaningfully. Segregate your procurement strategy by compliance regime.

For Manufacturers

• Feedstock flexibility is the core competitive advantage for the next cycle. Plants able to run palm oil, soybean oil, UCO, tallow, and distillers corn oil interchangeably will capture the widest margin regardless of which feedstock is tight.
• Renewable diesel and SAF capacity is where the growth is. Traditional FAME biodiesel demand is plateau-ing in most mature markets, but renewable diesel and SAF demand is accelerating. Neste, Diamond Green Diesel, and Phillips 66 have shown the strategic template.
• Carbon intensity scoring matters more than absolute volume. Under 45Z in the US and RED III in Europe, lower CI scores command meaningful premiums, and producers who invest in feedstock traceability, low-carbon hydrogen, and renewable electricity at the plant will capture that premium.
• Integration pays. Vertically integrated producers (Wilmar, Neste, Diamond Green Diesel, ADM-Cargill) consistently capture better margins than merchant biodiesel operators. Upstream feedstock access and downstream obligated party relationships both matter.