High palm oil prices squeeze Indonesia biodiesel mix

Indonesian state-owned oil firm Pertamina has cut the biodiesel blend in diesel fuel to 2.5 percent as rising palm oil prices and lack of incentives have reduced margins, an official at a biofuel group said on Tuesday.

Since last May, Pertamina has been retailing Biosolar — biodiesel made of 5 percent crude palm oil and 95 percent diesel — in 201 gas stations in Jakarta and 15 gas stations in Surabaya in East Java.
But the government subsidises biodiesel at the same level as fossil fuels, leaving Pertamina to cover the difference when biodiesel production costs exceed fossil fuel costs. “Pertamina has cut its biodiesel content to 2.5 percent from five percent since April this year due to high costs of palm oil feedstock,” said Evita Legowo, secretary at the National Biodiesel Development Team.

“It’s also difficult for Pertamina as biodiesel is not subsidised fuel,” she said. The Asia Pacific’s only OPEC member subsidises retail fuel prices, meaning biofuel has to compete with cheap subsidised fossil fuels.

This happened against the backdrop of climbing palm oil prices that have slashed biodiesel margins across the region and forced some countries, including Malaysia, to delay the introduction of biodiesel in its market.

Daily Times