The Current Landscape
As geopolitical instability continues to impact global energy markets, fuel security and fuel pricing are once again becoming central concerns for businesses operating across transport, logistics and supply chain. Ongoing tensions in the Middle East, including the escalating conflict involving Iran, have renewed concerns around oil supply distribution and volatility across global fuel markets.
With diesel prices remaining exposed to geopolitical uncertainty, conversations around alternative fuels are accelerating. In particular, Hydrotreated Vegetable Oil (HVO) is attracting increased attention as organisations reassess the long-term economics of low-carbon fuel adoption. Historically, one of the major barriers to wider HVO uptake has been cost, with the fuel often carrying a significant premium over conventional diesel. However, as fossil fuel prices rise and market volatility increases, that cost disparity is beginning to narrow in some regions and sectors.
The shift is creating a new dynamic within the energy transition. Businesses that may previously have viewed HVO as commercially difficult are now reconsidering its role as both a decarbonisation tool and a potential hedge against future fuel instability. At the same time, the growing focus on fuel resilience is accelerating wider conversations around how HVO fits into the long-term future of low-carbon transport.
The Rise of HVO
HVO has rapidly evolved from a niche alternative fuel into a central feature of the low-carbon transition. Its growth has been driven by a simple but powerful proposition: it can deliver significant greenhouse gas reductions while functioning as a direct replacement for diesel, without requiring major vehicle modifications or infrastructure changes.
This immediate usability has made HVO particularly attractive in sectors across supply chains, where electrification remains technically difficult or commercially unviable at scale. For many organisations, it offers an opportunity to reduce emissions immediately while avoiding mass operational changes.
Yet the conversation around HVO is no longer focused solely on environmental benefits. Increasingly, it is being shaped by a more complex combination of geopolitics, regulation, feedstock availability and global market economics.
Policy Driving Demand
Across Europe, regulatory frameworks are playing a decisive role in accelerating HVO adoption. The implementation of stricter renewable fuel mandates is requiring higher volumes of low-carbon fuels to enter the market, while changes to accounting mechanisms mean that fuels such as HVO must now be supplied in greater quantities to achieve compliance.
This is not simply supporting demand but structurally embedding it into the energy system. As governments continue tightening decarbonisation targets, demand for renewable diesel alternatives is expected to remain strong across the coming decade.
At the same time, multiple industries are beginning to compete for the same renewable fuel resources. Sustainable aviation fuel (SAF) relies on many of the same feedstocks as HVO, creating increasing pressure across the wider renewable fuels market.
Supply Constraints and Feedstock Pressures
As demand accelerates, concerns are growing around whether supply can continue to keep pace. Unlike fossil fuels, which are extracted, HVO production depends on biological feedstocks such as used cooking oil, animal fats and vegetable oils. These resources are finite and already in demand across multiple industries and global markets.
The result is growing pressure on supply, with demand increasingly outpacing the availability of sustainable feedstocks. This is pushing prices higher and creating greater competition between industries and regions for access to the same raw materials. Although new HVO production facilities are continuing to open globally, this does not solve the core issue of limited feedstock availability. In many cases, it simply means more producers are competing for the same finite resources.
This pressure is also raising broader questions around sustainability and long-term scalability. Historically, much of HVO’s environmental credibility has rested on the use of waste-derived feedstocks. However, as demand increases, there is growing debate around whether production could increasingly shift towards primary crops and virgin vegetable oils in order to meet market requirements.
The credibility of HVO feedstocks is therefore becoming more heavily scrutinised, particularly around the use of Palm Oil Mill Effluent (POME). POME is a byproduct of palm oil production that can be used as a feedstock for HVO. However, concerns are increasing around whether virgin palm oil is, in some cases, being intentionally classified as POME in order to meet sustainability criteria and renewable fuel targets. This has created wider questions around transparency, traceability and whether all HVO products deliver the environmental benefits they claim.
In the UK, certification schemes such as the Renewable Fuels Assurance Scheme and ISCC certification are designed to ensure that HVO originates from verified waste-derived feedstocks and meets recognised sustainability standards. Nevertheless, as global demand intensifies, scrutiny around feedstock sourcing is likely to increase further.
Beyond sustainability concerns, these dynamics also carry implications for land use, food systems and global agricultural markets. HVO is no longer simply an alternative fuel discussion; it is increasingly connected to wider debates around resource allocation and industrial prioritisation within the broader energy transition.
HVO as a Distinct Commodity
These pressures are fundamentally changing how HVO behaves within global energy markets.
Recent geopolitical instability and concerns surrounding global oil supply security, has further exposed the vulnerability of conventional fuel markets. As volatility within fossil fuel supply chains increases, organisations are beginning to view HVO not only as a decarbonisation tool, but also as part of a broader fuel resilience strategy. This changing perception is accelerating HVO’s emergence as a distinct and strategic commodity within the wider energy market.
HVO pricing is increasingly influenced by feedstock availability, regulatory incentives, regional supply shortages and international trade policy rather than the price of diesel alone. HVO is evolving into a distinct commodity market with its own supply-demand dynamics, risks and volatility.
Global trade is adding further complexity. Policy decisions in one region can rapidly impact availability and pricing elsewhere through subsidies, tariffs or sustainability regulations. For example, domestic incentives in the United States are encouraging producers to prioritise local markets, reducing export availability and tightening supply across Europe.
At the same time, European sustainability requirements and trade measures continue to influence which imports and feedstocks remain commercially viable.
In this environment, HVO is becoming increasingly tied not only to decarbonisation policy, but also to wider questions around energy security, trade resilience and geopolitical stability.
Strategic Implications for Organisations
For organisations navigating decarbonisation, the implications are becoming increasingly clear. HVO should not be viewed as a standalone solution, but as part of a broader and evolving transition strategy.
Its value lies in its ability to deliver immediate emissions reductions in sectors where alternatives are not yet ready or scalable. It allows organisations to act now, helping reduce carbon emissions, meet sustainability commitments and respond to tightening regulatory pressures without waiting for future technologies to fully develop.
However, adopting HVO also requires a more informed and strategic approach than in previous years. Businesses must increasingly consider fuel supply resilience, feedstock transparency, long-term pricing volatility and wider geopolitical risks alongside carbon reduction objectives.
HVO demonstrates both how far low-carbon fuels have progressed and how challenging the next phase of transition may become.