• Indonesia plans to raise palm-based biodiesel blend to 50% in 2026

• Move linked to rising oil prices and import cost pressures

• Policy could tighten global palm oil supply and support prices

Indonesia announced its ambition to increase the share of palm oil–based biodiesel in its fuel mix to 50% (B50), up from 40% currently (B40). Reuters reported the news, citing an announcement by President Prabowo Subianto on March 30 during an official visit to Japan.

The plan, which had been raised earlier this month by the country’s deputy energy minister, had initially been shelved in January for technical and financial reasons. While the president did not detail the reasons behind the reversal, the decision comes against a backdrop of rising global oil prices.

Following Israeli and U.S. strikes on Iran on February 28 and the closure of the Strait of Hormuz—which handles about a quarter of global seaborne oil trade—oil prices climbed above $100 per barrel, creating pressure for importing countries.

For Indonesia, the world’s largest producer and exporter of palm oil, increasing domestic use of the commodity is expected to help reduce its fuel import bill.

According to the national statistics agency (BPS), Indonesia imported 37.75 million tons of petroleum products in 2025, worth $23.46 billion—about 10% of its total goods imports for the year.

Implications for the market

Authorities have not yet provided a detailed timeline for implementing the B50 program. However, the Indonesian Biofuel Producers Association (APROBI) previously said that road tests for palm-based B50 biodiesel would not be completed before June or July, the initial deadline set by the energy ministry.

The move is expected to further strengthen the country’s biodiesel industry. According to the U.S. Department of Agriculture (USDA), the sector consumed 13.5 million tons of palm oil in the 2023/2024 season, making it effectively the second-largest global consumer of the commodity.

Markets are likely to watch developments closely. Increased domestic use could reduce export availability and support global palm oil prices on the Bursa Malaysia Derivatives Exchange. Such a trend could also narrow the price gap with soybean oil, its main competitor in the global vegetable oil market.

Espoir Olodo