Waste-Based Biofuels Ascend Globally, While Indonesia's $17B Graft Case Casts Long Shadow

Europe’s biodiesel market remains shaped by deepening gasoil backwardation, with the Aug/Dec ICE gasoil spread climbing to $53/mt. In the ARAG physical market, FAME 0 advanced to $1,332/mt while RME held a slim $16/mt premium. UCOME was conspicuously absent from trade today, potentially signaling hesitation on current price levels. BOGO fell over 2% to +476, not due to biodiesel weakness, but because of another sharp spike in gasoil, which rose +2.86% on the day and +21.29% over the last three months amid escalating geopolitical tensions.

Gasoil - weekly

The European Biodiesel Board’s newly released statistical report confirms that waste-based feedstocks now dominate the growth trajectory of EU production. While rapeseed oil remains the largest single feedstock at 34%, UCO accounts for 24%, making it the top waste-based input. Crucially, waste-based feedstocks collectively now represent 54% of total EU biodiesel feedstock use, compared to just 39% for crop-based sources—a milestone reached despite regulatory caps on their contribution toward RED II and RED III mandates. The split includes roughly 4.5 million tonnes each of Annex IX Part A and B materials. This shift is powered not only by GHG reduction incentives but by Europe’s double-counting mechanism, which gives waste-derived fuels an economic and regulatory edge. It is important to note that this mechanism is unique to the EU and has no equivalent in the United States.

In the U.S., D4 RINs remain rangebound at ~$1.18 despite recent volatility in soy oil and heating oil. Meanwhile, the USDA’s July WASDE report landed with little fanfare, leaving U.S. corn and soybean yields unchanged at 181.0 and 52.5 bu/acre respectively. Markets had braced for an upward revision given this season’s near-ideal crop conditions, but the report maintained status quo, offering no new directional impetus. In California, lawmakers are reportedly removing the proposed LCFS carbon credit price cap from SB237. With LCFS credits already trading weakly—averaging $51.10 per metric ton—this move suggests that the cap is now seen as unnecessary interference rather than protection. The market may benefit from renewed transparency and upside flexibility, especially for fuels with high carbon abatement like UCO- and tallow-based RD.

LCFS credit Prices

But the headline risk now emerges from Southeast Asia. Indonesian prosecutors have unveiled a $17 billion graft case centered on Pertamina, naming nine suspects and detaining a Trafigura employee in connection. This scandal cuts to the heart of Indonesia’s biofuel infrastructure, as Pertamina is the country’s principal distributor of biodiesel blends under the B35 mandate. The risk of financial paralysis at Pertamina raises serious doubts about Indonesia’s ability to execute its blending program and maintain investor confidence. This follows the high-profile Wilmar case in 2023, where $728 million in assets were seized—underscoring that these investigations are not isolated but systemic.

With palm oil stocks rising, Indonesian UCO and POME exports suspended, and global buyers already pivoting toward traceable waste-based alternatives, the timing couldn’t be worse for Jakarta. Moreover, pressure is mounting on palm-based fuel economics. POGO—currently at +$306/mt—shows a contango of -$34/mt to December, highlighting soft nearby demand rather than forward buying. This curve structure suggests that palm oil weakness will likely ripple across the broader vegoil complex (watch BOPO). As waste-based pricing remains relatively firm, palm and soy may need to realign, adding further complexity to global biofuel blending strategies.

BOPO