Palm oil production is a leading contributor to tropical deforestation, resulting in habitat destruction, increased carbon dioxide emissions, and local smog clouds across South East Asia. Palm oil is widely used for food, as a biofuel precursor, and in soaps and cosmetics. The global demand for palm oil is approximately 57 m tonnes a−1 and is steadily increasing. Alternatively, oleaginous yeast offers a highly credible renewable substitute. Over 80 species of oleaginous yeast are known, many of which have been demonstrated to catabolize a wide range of mono‐ and oligosaccharides in lignocellulose hydrolyzates. Many of the yeasts have demonstrated a high tolerance to furfurals and organic acid inhibitors and can be cultured at low pH, ideal for the industrial production of oil from lignocellulosic sources such as stover, forestry wastes, or energy crops. While the majority of the yeasts produce predominantly monounsaturated esters, some species are capable of producing oils higher in saturates akin to palm oil. While the manufacture of yeast oils on an industrial scale has been demonstrated, currently no large‐scale production from lignocellulose exists; however, through further strain selection, metabolic engineering, and valorization of co‐products, the production of a substitute oil from yeast is potentially feasible. © 2016 Society of Chemical Industry and John Wiley & Sons, Ltd