The conflict in the Persian Gulf and the effective closure of the Strait of Hormuz have sent energy and fertilizer prices surging and injected uncertainty into global markets. Governments now face a dual inflationary shock: fossil fuel costs have increased, and with them the nitrogen, phosphate, and potash inputs that modern agriculture depends on.
Food commodity markets have held up better than energy markets. Harvests have remained relatively adequate, inventories are not critically low, and the war has not directly disrupted major agricultural export corridors. This divergence between expensive energy and still-comparatively affordable food has created a narrow political window for an old policy instrument: increasing the mandatory blend of biofuels in transport fuel. If biofuel produced from feedstocks such as corn, sugarcane, soybean oil and palm oil are more cost-competitive than the fossil fuels they displace, higher blending levels can reduce average fuel costs. However, they may also revive concerns about their potential implications for food security.
The rise of biofuels: a decade and a half of acceleration
The modern biofuels era began after the 2003–2008 commodity supercycle and the food price crisis of 2007–08, which first brought the food-versus-fuel debate to a global audience. A second acceleration came after the 2022 Ukraine war, as Europe, Asia, and Latin America redoubled efforts to reduce fossil fuel dependence. The 2026 Gulf crisis is emerging as a third inflection point, but in a structurally different context, with farm input costs already elevated and producer margins already compressed.
Global biofuel production is heavily concentrated among a small group of leading countries, with the United States and Brazil standing out as the two largest producers. Other important producers include Indonesia, China, India, Germany, Argentina, Colombia and Canada, each contributing significantly through different biofuel pathways such as biodiesel, ethanol, and renewable diesel.
The Americas have a particularly important role in this market. Across the hemisphere, 12 countries already blend fossil fuels with biofuels and two others are in the process of introducing them. In aggregate, bioethanol replaces more than 18% of gasoline consumption, and biodiesel replaces about 6% of fossil diesel consumption, while bagasse and other agricultural residues also contribute to electricity generation in several countries.
There are several arguments in favor of biofuels produced from agricultural feedstocks, including the creation of guaranteed demand for agricultural commodities, support for farm incomes and rural economies, reductions in greenhouse gas emissions, and lower dependence on imported fossil fuels. Biofuels can also serve as a price buffer during periods of fuel market volatility and supply disruptions. The latter two arguments have regained prominence following the geopolitical tensions and energy security concerns triggered by the crisis around the Strait of Hormuz, which has renewed attention to the importance of diversifying energy sources and strengthening domestic fuel production.
An additional consideration is that biofuel value chains are multiproduct systems. Soybean and canola crushing produces both oil and protein-rich meal; corn ethanol production recovers protein, fiber, oil and minerals in coproducts used primarily for animal feed; and sugarcane processing uses bagasse to generate bioelectricity. Looking only at the volume of crops entering biofuel plants can therefore overstate the amount effectively removed from food and feed systems.
Government response to the shock
As has occurred during previous crises, governments have responded to rising fuel prices by increasing biofuel blending mandates. Brazil and Argentina were already on a path toward higher blending rates before the Gulf conflict began, while other major producers such as the United States, Indonesia, India, Malaysia and Vietnam implemented similar measures in response to the energy price shock.
In the Americas, the measures vary considerably in scope. Argentina maintained the mandatory ethanol blend at 12%, while authorizing voluntary blends of up to 15%. It also maintained the mandatory biodiesel blend at 7.5% while allowing blends of up to 20% under specified conditions. Brazil increased its ethanol blend from 30% to 32% and plans to raise the biodiesel blend by one percentage point annually. The United States authorized year-round use of gasoline containing up to 15% ethanol, while Paraguay expanded the permitted biodiesel range from 5% to 20% (7% in practice).
Managing potential food-security pressures: Tension vs. Impact
The argument against diverting food commodities into fuel becomes even stronger during periods of energy crisis, precisely when the incentive to expand biofuel production is greatest. The problem lies in the timing of the measures and the short-term effects, including local price pressures, supply bottlenecks or distributional impacts. Diverting a larger share of the harvest toward biofuel production reduces the supply available for food and feed markets exactly when agricultural producers are already facing tighter margins, as input costs rise faster than the prices they receive for their products.
As profitability declines, producers have fewer incentives to expand production in the following season, increasing the risk of future supply shortages and additional price volatility. This dynamic can disproportionately affect lower-income households and import-dependent countries: lower-income households spend a larger share of their income on food, while import-dependent countries are more exposed to food price spikes that rapidly increase food insecurity.
At the global level, however, the additional feedstock requirements associated with the recently announced mandatory blends appear relatively limited. The additional ethanol volume is estimated at about 1.14 million cubic meters, requiring approximately 1.87 million tons of corn and 4.72 million tons of sugarcane. These volumes represent around 0.14% of global corn production and 0.24% of global sugarcane production. The estimated additional palm oil requirement is approximately 0.98 million tons, or 1.2% of annual global production. These aggregate figures do not eliminate the possibility of local price pressures, supply bottlenecks, or distributional impacts, but they help put the scale of the immediate increase in perspective.
Additionally, the expansion of biofuel production requires careful consideration of environmental performance, particularly regarding greenhouse gas emissions, deforestation, and land-use change. Meeting higher mandates by expanding agricultural land or intensifying production could undermine the climate benefits that biofuels are intended to deliver while also threatening biodiversity and natural carbon sinks.
However, these risks are not inherent in biofuels and vary substantially depending on feedstock, production practices, prior land use, and regulatory framework. Approximately 83% of global biofuel consumption takes place in countries or regions that apply maximum life-cycle greenhouse gas intensity thresholds and, in most cases, additional safeguards addressing deforestation and land-use change. Such standards are rarely matched by other agricultural value chains (Torroba, 2025). New-generation biofuels, particularly sustainable aviation fuel (SAF), are subject to even broader criteria covering carbon stocks, water, soil, air quality, biodiversity, land use, human and labor rights, and food security (ICAO, 2025).
The current global land footprint also provides useful context. The net area associated with liquid biofuel production is estimated at approximately 32 million hectares, equivalent to 0.67% of global agricultural land and 2.03% of cropland. This relatively small global share does not remove the environmental risks identified above. Rather, it reinforces the need to consider where and how additional feedstocks are produced, the productivity of existing land, the carbon intensity of production, and the effectiveness of safeguards against deforestation and unsustainable land-use change.
Conclusion
The Gulf crisis has reactivated a decades-old debate with new urgency. Governments facing simultaneous energy price shocks and pressure to protect consumers have turned to blending mandates, a politically visible and administratively straightforward tool that can provide measurable short-term relief at the pump.
At the same time, the structural conditions that make this policy appealing in the short run are precisely the conditions that make its food security consequences most acute. The compressed margins facing producers mean that diverting more output to energy use leaves less room for error in food supply chains. And if blending mandates succeed in pulling more agricultural commodities into fuel markets, the price spread that justified the policy will itself diminish.
The legitimate arguments on both sides do not lead to simple conclusions. The current episode suggests that blending mandates adopted under political pressure of an acute energy shock should be carefully designed and time-limited. Policy design should combine long-term regulatory predictability with transparent monitoring and clearly defined flexibility mechanisms for exceptional circumstances. Stable policy signals are essential to mobilize investment in agricultural productivity, processing capacity, infrastructure and technology. However, stable policy signals are not enough. Robust and verifiable sustainability standards are also needed to prevent deforestation, protect natural carbon stocks, and ensure measurable life-cycle emission reductions. These requirements apply to the agriculture sector in general and to the biofuels sector in particular.
The evidence reviewed here, however, suggests that the link between food and fuel markets is more complex than a direct transfer of crops from one use to the other. Coproducts return protein-rich feed and other valuable outputs to the agrifood system, while productivity gains can expand feedstock supply without increasing the agricultural frontier. The central policy challenge is therefore not to choose between food and fuel, but to expand agricultural and biofuel production sustainably. When supported by productivity growth, technological innovation and enforceable environmental safeguards, biofuels can strengthen energy security, agricultural development and food security simultaneously.
About the Authors
Valeria Piñeiro
Director of Directorate of Technical Cooperation at IICA
She previously served as a Senior Research Coordinator at the International Food Policy Research Institute (IFPRI). She holds a PhD in Agricultural Economics from the University of Maryland and is also a faculty member in the Advanced Academic Programs at Johns Hopkins University.
Juan Pablo Gianatiempo
Research Analyst with the Markets, Trade, and Institutions Unit
International Food Policy Research Institute (IFPRI)
Agustín Torroba
International Biofuels Specialist
Senior Specialist in Bioenergy and Bioeconomy at the Inter-American Institute for Cooperation on Agriculture (IICA).
IICA Blog Editorial Committee:
- Joaquín Arias, International Specialist PAESA-DCT, IICA.
- Eugenia Salazar, Technical Specialist PAESA-DCT, IICA.
Disclaimer: The opinions expressed in this article are the sole responsibility of the authors and do not necessarily reflect the official position of the Inter-American Institute for Cooperation on Agriculture (IICA) or its Member States.
References
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- International Civil Aviation Organization. (2025). CORSIA sustainability criteria for CORSIA eligible fuels (4th ed.). ICAO.
- International Energy Agency. (2025). Delivering sustainable fuels: Pathways to 2035. https://www.iea.org/reports/delivering-sustainable-fuels
- Torroba, A. (2025). Action framework for Belém 4x: Doubling liquid biofuel production without additional land: Productivity, sustainability, and affordability. Inter-American Institute for Cooperation on Agriculture. https://repositorio.iica.int/items/7e19a8a5-7347-4a52-aa97-f70218d8555e
- Torroba, A., & Chiara, A. (2025). Closing agricultural yield gaps: A key and sustainable alternative for liquid biofuel supply. Inter-American Institute for Cooperation on Agriculture. https://repositorio.iica.int/items/d783d543-bb8e-4551-b2b2-304d6f23ed42
- Torroba, A., & Chiara, A. (2026). Liquid biofuels atlas 2024–2025. Inter-American Institute for Cooperation on Agriculture. https://repositorio.iica.int/items/72d9d164-1c75-4a69-9b59-f7fac41c8ce8
- United States Department of Agriculture, Foreign Agricultural Service. (2026a). Oilseeds: World markets and trade. https://www.fas.usda.gov/data/oilseeds-world-markets-and-trade
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