Indonesia, the world’s largest palm oil producer, is preparing to raise its biofuel mandate to B50 (50% palm-based biodiesel) or a transitional B45 from 2026, with the final decision still under review. The policy reflects Jakarta’s ambition to reduce dependence on imported fossil fuels, strengthen energy security, and support the palm oil sector, which provides livelihoods for over 16 million people. Indonesia currently imports around 1 million barrels of crude oil per day, with annual fossil fuel imports valued at roughly USD 30 billion. Expanding biodiesel use could save billions in foreign exchange while stabilizing rural incomes.

However, challenges remain. Higher biodiesel blends may strain supply chains and cause technical issues for engines not designed for such fuels. Even under the existing B35 mandate, operators have reported clogged filters and rising maintenance costs. Business groups suggest B45 as a smoother transition before moving to the more ambitious B50 target.

Globally, the policy carries wider implications. Diverting more crude palm oil to domestic energy could tighten export supply, especially as Indonesia remains the largest supplier to India, China, and Europe. Any reduction in availability may push prices higher and reshape trade flows.

While the Indonesian government insists exports will remain strong, the balance between domestic energy demand and international market commitments will be delicate. A potential price surge could encourage competitors such as Malaysia to expand their market share, ultimately reshaping the global palm oil trade landscape.