• Indonesia is reconsidering a plan to raise its biodiesel blend to B50 as oil prices approach $100 a barrel.
• The move could cut fuel imports but tighten global palm oil supplies.
• Markets are watching closely, as Indonesia’s biodiesel policy often drives volatility in vegetable oil prices.

Indonesia is once again considering raising the share of palm oil–based biodiesel in its diesel fuel, as global oil prices climb.

The proposal to introduce a B50 blend—diesel made with 50% palm oil biodiesel—had been shelved in January because of technical and financing concerns. But the plan is back under discussion, Reuters reported, citing comments made March 9 by Deputy Energy Minister Yuliot Tanjung.

The renewed interest comes as crude oil prices have surged following Israeli-U.S. strikes on Iran on February 28, pushing the price of a barrel toward $100.

For Indonesia, the world’s fourth-most populous country, the spike is significant. Since 2008, the government has rolled out an ambitious biofuel blending program designed to reduce dependence on imported fossil fuels. The current mandate requires a B40 blend, meaning diesel contains 40% palm oil biodiesel.

The country still relies heavily on imported fuel. According to Indonesia’s national statistics agency (BPS), the country imported 37.75 million tons of petroleum products in 2025, worth $23.46 billion—nearly 10% of its total goods imports that year.

“B50 could be implemented in the second half of the year, or possibly sooner,” Tanjung said. “But for now, the steering committee’s decision to keep B40 in place until the end of 2026 remains valid.”

Officials are monitoring oil prices closely before making a final decision.

A policy that moves global markets

Even without a formal decision, Indonesia’s biodiesel policy is closely watched by commodity markets. As the world’s largest producer of palm oil, the country plays a central role in global supply dynamics.

Jakarta’s biofuel mandate has become one of the main sources of volatility in vegetable oil markets. Government measures such as export levies and the Domestic Market Obligation (DMO)—which requires exporters to supply a share of their output locally before shipping abroad—already shape global supply flows.

Each time Indonesia raises the biodiesel blending requirement, a larger portion of the country’s palm oil output is absorbed by domestic fuel production. That reduces the amount available for export and tightens supply on international markets.

The result is often higher prices for vegetable oils worldwide, affecting food manufacturers as well as developing countries that depend on imports.

Prices have already started reacting. With tensions rising in the Middle East and oil prices climbing, palm oil has become more attractive as a biofuel feedstock compared with conventional diesel.

On March 9, benchmark palm oil futures for May delivery on the Bursa Malaysia Derivatives Exchange jumped 9% at the open to 4,774 ringgit ($1,215) per ton—the largest single-day gain in three years.

Espoir Olodo