A sharp rise in global oil prices, driven by tensions in the Middle East, has renewed focus on Ukraine’s potential in rapeseed cultivation, a key raw material for biodiesel production. However, experts say most of this opportunity continues to benefit Europe rather than Ukraine itself, Agronews.ua reported.
Speaking to industry observers, a fuel market participant said that when oil prices exceed $100 per barrel, biodiesel production becomes more attractive, including the idea of building processing facilities within Ukraine. Oil prices crossed this mark in mid-March, while diesel prices in Ukraine have hovered around 90 UAH per litre.
Despite this, analysts caution that higher oil prices do not automatically translate into rapid growth in Ukraine’s biodiesel sector. Uncertainty over the duration of the Middle East conflict and the possible reopening of the Strait of Hormuz remain key factors influencing fuel prices. Other structural challenges also continue to limit expansion.
The Ukrainian government has acknowledged that rising fuel prices are increasing demand for biodiesel raw materials. Deputy Economy Minister Taras Vysochyi said that if the conflict persists, rapeseed cultivation could expand significantly, potentially reaching 1.5 million hectares—around 400,000 hectares more than current levels. However, he noted that such an increase within a single year would be difficult.
Experts highlight that Ukraine has strong production capacity. According to Institute of Agrarian Economics, more than one tonne of biofuel can be produced from a hectare of rapeseed. With over one million hectares already under cultivation, the country could meet a large share of its agricultural fuel demand, estimated at 0.9 to 1 million tonnes annually.
Over the past two decades, rapeseed production in Ukraine has grown steadily, with average yields exceeding 2.5 tonnes per hectare and some farms achieving up to 4 tonnes. However, most of this output is exported rather than processed domestically.
Nearly all Ukrainian rapeseed exports are directed to the European Union, where demand from biodiesel producers continues to rise. Ukraine remains the largest supplier of rapeseed to the EU market. In countries such as Germany, rapeseed oil accounts for 70–80 percent of biodiesel production, making it a key part of Europe’s renewable energy strategy.
While biodiesel production does exist in Ukraine, it remains limited to small and medium-sized facilities producing relatively low volumes. Industry experts say the main reason is economic. Biodiesel is currently more expensive to produce than conventional diesel, partly due to excise taxes that make it less competitive.
Georgiy Geletukha, head of the Bioenergy Association of Ukraine, said biodiesel costs remain significantly higher than traditional fuel, reducing its appeal in the domestic market. He also pointed out that using rapeseed for fuel diverts it from food production, where it already has strong demand.
Policy gaps are another major challenge. Unlike bioethanol, which benefits from clear blending rules, biodiesel lacks similar regulatory support in Ukraine. Experts believe that introducing mandatory blending targets and tax incentives could help develop the sector.
Yaroslav Kulikovsky said that while the biodiesel market remains small, it holds potential as part of broader efforts to reduce emissions in transport and agriculture. According to long-term projections, Ukraine could produce up to 850,000 tonnes of liquid biofuels annually by 2050.
However, analysts stress that achieving this goal will require more than raw material availability. A comprehensive government programme, improved financing, and stronger infrastructure will be essential for building a viable biodiesel industry in Ukraine.
