Indonesia's Biodiesel Program Likely to Boost Palm Oil Prices

12-Nov-2025 01:58 PM

Singapore. Indonesia, the world's leading palm oil producer and exporter, plans to increase the mandatory use of palm oil in biodiesel or biofuel production from 40% to 50%.

This will result in a sharp increase in domestic demand and consumption of this important vegetable oil, leaving fewer stocks available for export.

According to industry and trade analysts, if Indonesia implements its ambitious plan, the supply and availability of palm oil in the international market will become complex, and prices are likely to rise sharply.

Indonesia, located in Southeast Asia, has already become one of the world's leading producers of biofuels, and further growth in production is expected in the future. This will not only reduce its petroleum import costs but also help control greenhouse gas emissions.

Indonesia's annual palm oil production is now stabilizing, and a further increase in biofuel use is likely to have a positive impact on global market prices. Production is also not increasing in Malaysia.

A rise in palm oil prices could increase difficulties for a major importing country like India. Palm oil prices have seen a lot of fluctuations in recent months.

Compared to last year, the average price of palm oil has currently fallen by about 6 percent to 4145 ringgit per tonne. Gapki says that if the B50 program is implemented, the price of palm oil could reach 5000 ringgit per tonne next year.