TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
High palm oil price delays Indonesia’s B40 biodiesel plan
Change text size
Gift Premium Articles
to Anyone
Share the best of The Jakarta Post with friends, family, or colleagues. As a subscriber, you can gift 3 to 5 articles each month that anyone can read—no subscription needed!
President Joko “Jokowi” Widodo (left, in red), state-owned oil and gas holding company Pertamina president director Nicke Widyawati (center, wearing yellow veil) and several ministers symbolically kick off the B30 policy at a Pertamina gas station on Jl. MT. Haryono in Jakarta on Dec. 23, 2019. (JP/Norman Harsono)
D
oubts have emerged over Indonesia’s plan to roll out the use of B40-type biodiesel by July this year as the high price of crude palm oil (CPO) renders such fuel uneconomical.
Stakeholders have said that Indonesia’s biodiesel subsidy budget for this year, sourced from the CPO export levy and estimated at Rp 46 trillion (US$3.29 billion), was insufficient for the B40 program given the high current CPO price, which has rallied to around $1,080 per ton this year from around $530 in May 2020.
“Right now, price is the main hurdle for B40. The sharp rise in CPO prices has made biodiesel prices rise significantly as well,” energy economist Alloysius Joko Purwanto, who penned numerous articles on transportation economics, told The Jakarta Post on Thursday.
Joko, a researcher with the Economic Research Institute for ASEAN and East Asia (ERIA), said the difference between biodiesel and diesel prices had climbed from roughly Rp 3,500 per liter late last year to Rp 5,000 per liter today.
Thus, he calculated that Indonesia would need Rp 56 trillion to subsidize a B40 biodiesel program implemented starting in July under current prices, assuming the country consumes 32 million kiloliters (kL) of diesel throughout 2021.
Joko said CPO prices needed to be below $760 per ton to implement B40 this year without exceeding the budget. Prices even needed to be below $900 per ton to implement B30 within the budget limit. The prices are far below the expectations of the Indonesian Palm Oil Producers Association (Gapki) for this year at between $850 and $900 per metric ton of CPO.
Coordinating Economic Minister Airlangga Hartarto had aimed to escalate Indonesia’s biodiesel policy by transitioning from B30 to B40 in July. With its biodiesel policy, the government wants to simultaneously cut Indonesia’s oil imports, raise renewable energy consumption and create domestic demand for the country’s palm oil industry, the largest in the world.
