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The war in the Middle East has pushed margins on renewable fuels to record levels as governments and large buyers look for alternatives to fossil-fuel-derived products.
Neste, the world’s biggest producer of renewable jet fuel, said its net profit for the first half swung from a €76mn loss a year earlier to €1.3bn.
Its sales margin on renewable products more than tripled year on year to a record $1,223 a tonne in the second quarter, up from $361 a tonne a year earlier and $164 ahead of analyst forecasts.
Sustainable aviation fuel (SAF) and renewable diesel prices in Europe rose as much as 31 per cent and 24 per cent, respectively, from prewar levels, according to Argus Media, a pricing agency.
These alternative fuels are made from products such as cooking oil and animal fats.
Heikki Malinen, Neste’s chief executive, said the conflict in the Middle East “dominated global oil and product markets” in the second quarter, creating “an exceptional market environment”.
More recently, margins had dropped from the record levels as feedstock prices caught up with rising product prices, management said in a telephone conference on Friday.
Malinen said he was more “on the cautious side” about the outlook for the company as a whole, as volatile oil product prices made future margins difficult to predict.
He added that repeated supply shocks were keeping energy security high on the “policy agenda”, potentially strengthening the longer-term case for renewable fuels as governments sought alternatives to imported fossil fuels.
“Reducing reliance on imported fossil fuels is an increasingly important strategic goal both to strengthen energy security of supply and to mitigate climate change.”
The renewable jet fuel market, however, remains heavily reliant on policy mandates. According to the International Energy Agency, SAF consumption is expected to expand ninefold from 1bn litres in 2024 to 9bn litres in 2030, but will still account for only 2 per cent of total aviation fuel demand at the end of the decade under the agency’s main scenario.
Neste also said that it benefited from the increased demand and elevated prices due to expectations of increased biofuel demand from the US.
The Trump administration finalised new renewable fuel rules in March that sharply raised biofuel mandates — the volumes of biofuels that refiners and importers are required to blend into conventional fuels — for 2026 and 2027, with the US Environmental Protection Agency expecting biodiesel and renewable diesel production and use to rise more than 60 per cent from 2025 levels.
“There is an expectation that [the bullish market sentiment] is not going to abate no matter what happens with the Iran war, because there is this mandate . . . for these billions more gallons of biodiesel and renewable diesel to come to market,” said Jess Dell, head of US biofuel pricing at Argus.
