What Caused Biofuel to Become Cheaper Than Conventional Bunkers?
The reversal came as the closure of the Strait of Hormuz sent fossil fuel prices soaring across global markets. Between February and March, average European gasoil prices climbed $476 per tonne, while UCOME increased by just $65 per tonne over the same period. This divergence—fossil fuels spiking sharply while biofuel costs remained comparatively stable—created the conditions for biodiesel's brief cost advantage.
A new white paper from energy pricing specialist General Index and the London Stock Exchange Group (LSEG), titled Lessons From Hormuz: Disruptions For Renewable Fuel Cost Competitiveness, documents this shift. The calculation incorporates EU Emissions Trading System (ETS) allowances and potential FuelEU Maritime penalties. In the three months preceding April, B30 had actually been between $11 and $27 per tonne more expensive than conventional VLSFO on the same basis—underscoring just how significant this reversal was.
How Long Did the Biofuel Cost Advantage Last?
B100 UCOME, after incorporating carbon costs, traded at a discount to marine gasoil for eight weeks between March and May. The study's authors—General Index lead analyst David Elward and LSEG senior analyst Tim Deehan—caution against interpreting these figures as evidence of a permanent shift in the market. Biofuels remain generally more expensive than conventional bunkers before carbon costs are included, and the Rotterdam comparisons incorporate potential regulatory penalties rather than necessarily reflecting costs incurred by every vessel. Even so, the report argues that carbon pricing is beginning to demonstrate real effectiveness in making renewable marine fuels commercially competitive—a signal worth watching for forwarders and operators managing fuel procurement strategy.
Did All Renewable Fuels Benefit Equally From the Hormuz Shock?
No—traditional biodiesels proved relatively resilient, while hydrotreated vegetable oil and sustainable aviation fuel (SAF) prices rose sharply alongside their fossil equivalents. SAF prices jumped $636 per tonne between February and March, despite having supply chains largely independent of the Hormuz disruption.
What Does This Mean for Shipping Versus Aviation?
The findings highlight a widening gap between shipping and aviation's paths to decarbonization. While EU carbon regulations briefly made marine biofuels the cheaper compliance option for shipping, the researchers calculate that aviation would need carbon prices of around $445 per tonne of CO2 equivalent—roughly five times prevailing levels—to close the gap between SAF and conventional jet fuel. For stakeholders across the logistics network monitoring both sectors, this divergence reinforces how differently carbon policy is impacting fuel competitiveness depending on mode of transport.
Copyright : https://splash247.com/hormuz-shock-briefly-makes-biofuel-the-cheapest-bunker-option/
Mr Sam Chambers
