Global Oil Price Surge Drives Acceleration of B50 Implementation
The surge in global oil prices due to the escalation of conflict in the Middle East could serve as the right momentum to accelerate the implementation of the 50 per cent biodiesel policy, or B50. B50 is a fuel blend consisting of 50 per cent diesel and 50 per cent vegetable-based biofuel derived from palm oil.
Executive Director of the Palm Oil Agribusiness Strategic Policy Institute (PASPI), Tungkot Sipayung, urged the acceleration of the biodiesel mandate increase from B40 to B50 or higher to address the challenges posed by rising global oil prices.
He warned that the increase in oil prices could disrupt the stability of domestic diesel availability while triggering inflation. “The rise in global crude oil prices will add to the burden on the state budget. For every US$10 per barrel increase in oil imports, the additional burden on the state budget rises by around Rp20-30 trillion,” he said in Jakarta on Wednesday (18/3).
Tungkot explained that the Middle East region, particularly the energy distribution route in the Strait of Hormuz, supplies about 20-30 per cent of the world’s fossil energy needs, including those used by Indonesia. This situation has the potential to significantly increase the financing burden for energy imports. Developing renewable energy as a substitute for fossil fuels becomes crucial to reduce dependence on imported fossil fuels.
“Oil-importing countries like Indonesia are forced to pay more than double the previous import price for fossil oil due to the conflict in the Middle East,” he stated.
Tungkot assessed that the Indonesian government has sufficient experience to implement the B50 biodiesel mandate. The biodiesel mandate ecosystem that has been built up to B40 (a 40 per cent biodiesel and 60 per cent diesel blend) is an important foundation for advancing to B50 or beyond.
PASPI noted that Indonesia has the highest biodiesel blending rate in the world and is the third-largest biodiesel producer globally after the European Union and the United States.
“The B50 plan was actually prepared by the government before the current Middle East conflict occurred,” he emphasised.
It should be noted that the Indonesian government has implemented the biodiesel mandate policy since 2009 with a 1 per cent palm biodiesel blending rate and 99 per cent fossil diesel (B1). The Indonesian government has continued to accelerate the development of the biodiesel mandate policy through strengthening the ecosystem and increasing the palm biodiesel mandate intensity to reach B40 by 2025.
One form of government support is through incentives for biodiesel development to cover the difference between the biodiesel market index price (HIP) and diesel. This incentive support comes from palm oil funds from export levies managed by the Plantation Fund Management Agency (BPDP).
Tungkot assured that the national biodiesel industry capacity, reaching around 22.5 million kilolitres, is sufficient to support B50 implementation this year.
He added that from the raw material availability side, crude palm oil (CPO) is also sufficient to meet B50 implementation. Tungkot stated that B50 implementation requires about 20 million kilolitres of palm biodiesel (FAME). To produce that volume, a CPO supply of around 16-18 million tonnes is needed. Meanwhile, national CPO (and CPKO) production in 2025 is expected to reach around 57 million tonnes.
“So, in terms of raw materials, there is sufficient availability for B50 implementation,” he said.
Nevertheless, he acknowledged that increasing the CPO allocation for domestic biodiesel needs could potentially reduce export volumes in the short term. According to him, this is a policy consequence that needs to be considered strategically by the government.
“There might be a slight reduction in exports if domestic CPO production does not increase significantly,” he concluded. (H-3)
Secretary General of the Indonesian Biofuel Producers Association (Aprobi), Ernest Gunawan, stated that the allocation for the B40 mandate programme in 2026 is set at 15.646 million kilolitres.
Amid ongoing volatility in global energy prices and the continuous pressure of oil and fuel imports on the state budget, energy policy is now more than just a technical matter.
The government plans to implement a 10 per cent ethanol blending mandate, or E10, on fuel. Minister of Energy and Mineral Resources Bahlil Lahadalia said this follows the success of biodiesel.
The government will stop diesel imports starting in 2026 through the implementation of the B50 mandate. This policy strengthens national energy independence.
The government plans to reduce crude palm oil (CPO) exports by 5.3 million tonnes next year for the B50 biodiesel mandate in 2026.
Amid ongoing volatility in global energy prices and the continuous pressure of oil and fuel imports on the state budget, energy policy is now more than just a technical matter.
The Ministry of Energy and Mineral Resources targets the trial of the mandatory vegetable-based fuel (BBN) biodiesel blending programme based on palm oil at 50 per cent (B50) on diesel fuel to be realised in 2026.
The government will stop diesel imports starting in 2026 through the implementation of the B50 mandate. This policy strengthens national energy independence.
The government, through the Ministry of Energy and Mineral Resources (ESDM), is maturing the use of 50 per cent biodiesel blending on diesel fuel, or B50.