The price of biodiesel for shipping has dropped to an unprecedented low this week, falling below the cost of most conventional marine fuels amid rising diesel prices driven by the conflict in the Middle East. At the port of Rotterdam, the world's largest cluster for biofuel production, biodiesel prices hit as low as $985 per tonne on Monday, according to data from pricing agency Argus. This marks a significant decline from July levels, when prices reached $1,388 per tonne, though prices have since risen to about $1,240 per tonne.

In contrast, marine gas oil, a key conventional shipping fuel, surged to $1,528.50 per tonne this week, nearly doubling from $714.50 per tonne before the outbreak of the Iran war in February. The disruptions to fossil fuel supplies have contributed to this spike. When factoring in the cost of meeting EU carbon emission regulations and the price of maritime carbon permits, biodiesel was found to be less expensive than nearly all conventional shipping fuels.

Industry analysts suggest this unusual pricing dynamic could accelerate the adoption of biodiesel and other biofuels within the shipping sector, which accounts for roughly 3% of global greenhouse gas emissions. Madeleine Jenkins, a European biofuel pricing specialist at Argus, highlighted the potential for shipowners to reconsider their fuel strategies as bio-marine fuels may become more cost-effective than marine gas oil once emissions savings under EU schemes are included.

Biodiesel, which can be produced from crops or organic waste, offers an accessible option for reducing shipping emissions. Its use requires minimal modifications to most vessels, as it can be used either in blends with conventional fuels or in pure form. Ships generally burn about 7 to 10% more biodiesel per journey due to its slightly lower energy density compared to conventional fuels.

A large portion of biodiesel sold in Rotterdam, the world’s second-largest shipping fuel hub after Singapore, is derived from waste products such as palm oil mill effluent from Southeast Asia and food waste oil. These feedstocks have insulated biodiesel prices from the sharp increases seen in fossil fuels this year.

Sales of marine biodiesel blends in Rotterdam have surged, rising sharply year-on-year in the second quarter of 2026 and more than doubling from the previous quarter. This growth is attributed to higher diesel prices driven by geopolitical tensions and the implementation of Dutch regulations under the EU Renewable Energy Directive III, which mandate progressively stricter emissions reductions by marine fuel suppliers. To meet these targets, some suppliers have lowered biodiesel prices to increase sales volumes.

EU regulatory measures, including the Emissions Trading System and FuelEU Maritime regulation, have also reshaped economics for shipowners by imposing rising costs on carbon-intensive fuels. Comparatively, biofuels offer a simpler transition for the existing fleet than alternative options like methanol or ammonia. Jason Stefanatos, global decarbonisation director at maritime classification group DNV, characterized biodiesel as a "drop-in solution," noting that most modern marine engines can utilize it with minimal retrofitting, though ships might require system adjustments such as dual fuel tanks or operational procedural changes.

Despite recent growth, biodiesel represents a small fraction of the global shipping fuel market. DNV estimates that biofuels make up about 0.6% of global shipping fuel consumption, with competition for sustainable feedstocks from other sectors such as road transport and aviation limiting their wider use. Additionally, EU rules restrict which materials are eligible for emissions benefits to avoid diverting food crops to fuel production, further constraining supply.

Stefanatos acknowledged biodiesel’s role in future shipping fuel mixes but emphasized that its contribution will heavily depend on factors including cost and feedstock availability. Argus projects demand for advanced unblended biodiesel in Rotterdam could reach around 250,000 tonnes this year, accounting for more than 40% of the estimated 600,000-tonne global marine biodiesel market. Global biodiesel production stands at just under 4 million tonnes annually, serving industries beyond shipping.