Compatibility of mid-level biodiesel blends in vehicles in Indonesia
International policy and market drivers of Indonesian palm oil demand
Indonesia produces roughly half of all palm oil and palm kernel oil globally. Palm oil has a variety of uses in food, animal feed, oleochemicals, and other industrial purposes. One significant use of palm oil is in biodiesel and renewable diesel production, which can substitute for diesel fuel in transport and other uses.
Recent policy changes limiting palm oil and palm biodiesel imports in several countries could affect the global palm oil market. Indonesia contributes roughly half of all palm oil consumption and imports globally and would thus be affected by any significant changes to global demand. This briefing paper reviews major policy and market drivers of palm oil demand in China, the European Union (EU), India, Pakistan, and the United States (U.S.). We provide a basic projection of the impact of potential policy changes on global and Indonesian palm oil demand and place these effects in the context of overall global trends.
Global palm oil imports have tripled since 2000 and have been steadily growing in our five focus countries. Recent changes in tariffs on vegetable oil imports in India and Pakistan and U.S. soybeans in China have the potential to affect global demand for Indonesian palm oil. Recent changes in EU biofuel policy could also have a significant, but likely smaller, impact on palm oil demand. EU and U.S. tariffs on Indonesian biodiesel have only a negligible effect on demand for Indonesian palm oil. Regardless of changes in international biofuel policy, global demand for Indonesian palm oil is likely to continue growing.