The Indonesian government has recently decided to implement a mandatory biodiesel program starting July 20 of the following year. Senior cabinet minister Luhut Pandjaitan has said that biodiesel will be incorporated at an increasing percentage in fuels. The implementation of this program is set to begin by July 20 of the year 2022, and he emphasized that a transition period of five years is required to prepare the country’s fleet of trucks for the new policy.

The government has announced its plans to extend the palm oil-based gasoline content in biodiesel. Starting July 20 of the next year, Indonesia will raise its biodiesel blend to 35% from 30%. The country is one of the world’s top producers of palm oil, and its large inventories are weighing down its ability to control home cooking oil costs. The export ban, which was imposed last May, did not help matters. The high palm oil inventory has been a contributing factor to rising prices for palm fruit.

The introduction of the B35 biodiesel mandate in Indonesia has created a dilemmatic situation in the local market. The mandatory program could result in higher domestic prices for cooking oil, which could hurt the palm oil industry’s bottom line. While this policy will cover the price differential between domestic and imported biodiesel fuels, it will not reverse the downward trend in CPO prices and will do little to help farmers’ FFB prices.