Middle East conflict reshaping Australian canola industry as mass-attention shifts to heavy import reliance

The conflict in the Middle East has opened up the potential for canola as an answer to soaring biofuel demands, creating a more diversified base for Australian farmers. A new report from Rabobank found the conflict could force a rethink of how canola was used as a biofuel as the uptake of electric vehicles was largely limited to personal use. Canola — a key input in biodiesel production — could be an alternative for freight, mining and aviation industries reliant on diesel and jet fuel and provide an alternative market for WA’s grain growers as energy markets continue to evolve and change. WA grew 4.37Mt of canola for the 2025/26 harvest — the third biggest crop behind wheat and barley. RaboResearch senior grains and oilseeds analyst Vitor Pistoia said the sudden demand as a result of the conflict created a “genuine opportunity” to reconsider the place of canola in Australia’s agriculture and energy sectors. On-shore refining has been tested in WA by global giants such as BP and Cargill and further domestic capacity could provide a pathway to capture and manage the value of by-products. Australia exports about six million tonnes of mostly unprocessed canola annually that, converted into renewable diesel, would equal more than two billion litres of fuel. “By comparison, Australia imports more than 30 billion litres of diesel annually,” Mr Pistoia said. “At the moment, we export the raw material and import the finished fuel. That means a large share of the processing margin, jobs and strategic control sits offshore. “As biofuel demand rises, that imbalance becomes harder to ignore.” Mr Pistoira said a reduction in energy exports from the Persian Gulf as a result of the conflict had drawn large-scale attention to Australia’s security and heavy reliance on imported fuel. “While impacts are still emerging, these types of conditions reinforce policy support for alternative fuels, potentially accelerating biofuel policy implementation and investment in lagging markets such as Australia,” he said. “Some countries have already announced increases in mandates of biofuel blending in fuel, including Thailand, Indonesia, Vietnam, Argentina and the US.” The report presented two potential pathways for the canola industry; domestic crushing expansion and refining, or an increase in canola exports to international biofuel refineries. “Local processing could allow Australia to capture more value across the supply chain, while improving utilisation of co-products such as canola meal,” Mr Pistoia said. He said canola oil “aligns well” with refinery pathways under construction across the Asia-Pacific region. “Australia’s geographic proximity to these markets also matters, as shorter shipping distances can reduce freight costs and emissions compared with some alternative origins,” Mr Pistoia said.