LARTC 2026
Biofuels help LATAM refiners navigate geopolitical crisis from Middle East conflict
MARCIO WAGNer DA SILVA Petrobras
The conflict between the US and Iran started in February, causing disruptions in the crude oil production and process- ing chain. The significant rise in crude oil prices prompted refiners to look for alter- natives to ensure supplies of energy. In some cases, ensuring internal demand by derivatives became a major challenge, par- ticularly in developing economies such as Latin America. Here, governments face a trade-off between the substantial reve- nue generated from high prices of crude oil derivatives and the impact of inflation on the local economy. A common characteristic of develop- ing nations is the heavy reliance of their economy on transportation fuels, such as diesel and gasoline, leading to a direct relationship between crude oil derivative prices and inflation. Figure 1 illustrates the rise in crude oil prices due to the con- flict in the Middle East, based on data from the International Energy Agency (IEA). According to Figure 1, a 130% increase in crude oil prices was observed between February and March 2026. This scenario creates significant pressure on refiners: first, to ensure crude oil supply, and sec- ond, to deal with the prices of their raw materials and pass on the full increase in oil prices onto refined products. As previously mentioned, this sce- nario became especially challenging for the Latin American refining industry due to its strong dependence on transporta- tion fuels. This prompted governments to take action to avoid inflationary effects on their economies, despite the revenues generated from crude oil exports. In some countries, exports were limited to ensure internal supply. In this business scenario, and given the abundant availability of biomass in Latin America, a natural solution to address the challenges posed by the geopolitical cri- sis is to accelerate and expand the use of oil biofuels in the region’s energy matrix. This aims to increase the volume of deriva- tives produced and reduce exposure to the effects of crude oil price volatility from the conflict. Most Latin American countries raised their blending mandates, including more ethanol to gasoline. For example, Brazil raised its ethanol-to-gasoline blend- ing from 27% to 30% (by volume) and is considering another raise to 32%. The same procedure was adopted for diesel blending; again, as an example, the cur- rent Brazilian mandate requires a 15% biodiesel blend with fossil diesel, and the government is studying the possibility of raising this requirement to 20%. Driven by the need to reduce the car- bon intensity of the energy matrix, there has been a growing demand for coproc- essed fuels, such as sustainable aviation
the Latin American energy sector, serving not only as a means of decarbonisation but also as a crucial component for ensuring the energy security of nations. The growing demand for biofuels repre- sents a significant opportunity for Latin American refiners. With the region’s rela- tively abundant biomass resources, refin- ers can increase biomass coprocessing in their facilities, thereby gaining a competi- tive edge in the global market. References 1 IEA (2026), Oil Market Report – May 2026, IEA, Paris. https://www.iea.org/reports/ oil-market-report-may-2026 2 IEA (2025), Renewables 2025: Analysis and Forecasts to 2030 – October 2025, IEA, Paris. https://www.iea.org/reports/renewables-2025 renewable fuels are projected to account for nearly 6% of global energy demand in the industrial, building, and transportation sectors. This scenario creates a potential competitive advantage and opportunity for Latin American refiners
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Figure 1 Global oil prices outlook 1
ically focused solely on decarbonisation. However, the geopolitical crisis has high- lighted the potential of biofuels to enhance national energy security. Conclusion The geopolitical crisis arising from the conflict in the Middle East has under- scored the relevance of biofuels to the global energy matrix, particularly for Latin American refiners, who have natural com- petitive advantages. Increasing the use of biofuels helps Latin American nations meet their domestic demand for crude oil derivatives and reduce their exposure to the challenges posed by geopoliti- cal instability. This transition is essential for minimising the impact of the Middle Eastern conflict on the Latin American economy. In some cases, the traditional mind- set of the refining business may view the growth of biofuels as a threat to crude oil refining due to the demand displacement. However, the geopolitical crisis has high- lighted the opposite effect. The neces- sity to reduce the carbon intensity of the energy matrix is a fact, not a trend. The circumstances brought about by the con- flict have reinforced the role of biofuels in
fuel (SAF) and hydrotreated vegetable oil (HVO), as well as pure biofuels like ethanol. Figure 2 depicts the growing demand for biofuels over the period 2024-2030. According to the IEA, renewable fuels are projected to account for nearly 6% of global energy demand in the indus- trial, building, and transportation sectors. This scenario creates a potential compet- itive advantage and opportunity for Latin American refiners to navigate the hostile global environment for fossil fuels. The competitive advantages of Latin American refiners in biorefining include a favourable climate, abundant high-qual- ity land, and strong agricultural capacity. Considering these characteristics, even among the Latin American players, Brazil stands out as a major biofuels producer, mainly bioethanol from sugarcane. Currently, Latin America accounts for around 25% of global biofuels produc- tion, with the capacity to increase this share, given its competitive advantages mentioned above. Additionally, there is ris- ing demand for coprocessed fuels such as SAF to help reduce the carbon intensity of the global energy matrix. It is interesting to note that discus- sions related to renewable energy are typ-
Contact: marciows30@gmail.com
Total demand Forecast revisions to biofuel demand growth and total demand, main case, 2024–2030
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Figure 2 Biofuels demand forecast: 2024 to 2030 2
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