Indonesia's Bioenergy Push Needs Demand Signals as Asia Absorbs $25B Hormuz Shock
Asia-Pacific businesses have lost an estimated $25 billion to Middle East fuel disruptions while Indonesia's bioenergy industry cites demand certainty as the condition for scaling up.
Asia-Pacific businesses have absorbed an estimated $25 billion in energy-related losses from the Middle East conflict, with freight identified as the primary transmission channel into regional supply chains, according to Asian Power reporting published on June 29, 2026.7
More than 90% of heavy vehicles across the region run on diesel, Symons said, meaning that every upward move in distillate pricing from Hormuz disruption passes directly into logistics and input costs for manufacturers and exporters across Southeast Asia. The cost pressure has been broad-based — not limited to energy-intensive industries but propagating through the entire value chain as elevated freight charges compress margins at multiple stages.7
A separate analysis published on June 30, 2026 in Asian Power argues that the energy security crisis has revealed a gap in Southeast Asia's bioenergy sector: the absence of credible, long-term demand signals that would justify scaling domestic production capacity. The piece, authored by Dr. Reza Yosri, cites Indonesia's programme as a reference point. Indonesia's ethanol blend policy is underpinned by domestic cassava-based production from six fuel-ethanol plants, with combined capacity equivalent to roughly 40% of projected E10 demand.8
That 40% coverage figure illustrates the constraint facing bioenergy at scale across the region. Indonesia has one of the more developed domestic feedstock bases in Southeast Asia, yet even its programme relies on a significant share of demand that must still be met by other means. Without government-backed purchase commitments or long-duration offtake agreements that allow producers to underwrite plant capital, the investment case for new bioenergy capacity remains weak.8
The broader demand picture compounds the challenge. Power demand from data centres, electric vehicles and green industrial parks in Southeast Asia is forecast to grow by more than 100 TWh in the next three to four years, with the three sectors together requiring more than $200 billion in investment, according to ESG News analysis published on May 20, 2026. Grid investment alone is estimated to face an $18 billion annual shortfall by 2035 on current trajectories.2
That demand growth is arriving into a supply infrastructure that has been under stress since the Hormuz blockade tightened global LNG availability. Asian countries responded by switching back to coal — coal plants across Southeast Asia operated at higher capacity through the disruption period, according to The Diplomat reporting from May 19, 2026. LNG prices in Asia had surged above $25 per million British thermal units at the peak of the supply shock, according to DataBizTimes reporting from March 2026. JKM Asian LNG spot pricing as of June 29, 2026 was $15.82/MMBtu, well below that peak. Newcastle coal physical pricing was $113.35 per tonne on June 29, 2026.4,56
Analysts at the global energy policy institute quoted in The Diplomat described the coal pivot as "largely a short-term response rather than a long-term direction." But the speed at which Asian governments returned to coal when supply became constrained sets the baseline expectation for how bioenergy competes: it needs to be reliably available at the moment of stress, not just economically attractive in normal conditions.5
Indonesia's President Prabowo Subianto made the exposure explicit in April 2026 when he told a televised cabinet meeting that the Strait of Hormuz "determines the flow of most of the world's energy," raising the possibility of Indonesia charging a toll to vessels transiting the Malacca Strait as a counter-leverage measure, the Economist reported on May 19, 2026. The comment illustrated how directly Hormuz vulnerability shapes Indonesian energy policy calculations — and why domestic bioenergy capacity carries a security premium beyond cost competitiveness alone.3
The barrier for bioenergy producers across the region is the same one that constrained Indonesia's ethanol plants: governments have been unwilling to commit to the kind of long-dated volume guarantees that give investors confidence to build. Crisis conditions push governments toward whatever fuel can fill gaps fastest, which generally means coal and spot LNG rather than new domestic biorefinery capacity. The current Hormuz episode has not changed that dynamic, even if it has sharpened the rhetoric around energy self-sufficiency.8,1
Ember senior energy analyst Dinita Setyawati warned that the regional coal pivot "will impose substantial environmental and public health costs" alongside the near-term supply relief it provides.1
If Indonesia formalises its E10 mandate with a binding procurement mechanism for domestic cassava ethanol, the 40% domestic supply coverage becomes a floor from which further investment can be underwritten. Without that step, production capacity remains stranded once crisis pressure subsides and coal pricing retreats from its current elevated range.8