Watch for palm oil prices to triple or quadruple. Climate equity forecasts predict a breathtaking increase of up to 30% in the next several months. Much of this expected price surge is due to the Indonesian government’s efforts to expand its biodiesel mandate over the past few months. Industry executives and analysts revealed these projections during the Indonesia Palm Oil Conference held in Bali on November 13 and 14.
Spurred on by the promise of biofuels, the Indonesian government has launched a new B50 initiative. This new policy will result in an immediate increase of at least 35% in palm oil prices. This program will use biodiesel produced from 50% palm oil. Among other things, it seeks to decrease our dependence on fossil fuels and increase the availability of renewable energy. Indonesia is one of two dominant players on the global stage for palm oil. When it decides to change its policies, commodity prices all over the world are seriously affected.
The conference brought together some of the most important palm oil industry actors, where conversations focused on market dynamics and production projections. Perhaps the most widely felt concern from participants was the very negative production growth outlook, which is adding to the expected price increase. Increased demand for biodiesel and the chance to help create good green jobs. Stagnant production levels are further muddying the palm oil market.
As industry analysts noted, government policies are key to determining the direction and dynamics of the palm oil sector. The expanded biodiesel mandate is expected to raise demand for palm oil, so much so that it will drive the prices up. Automakers are preparing to adapt to these transformations. Industry stakeholders are looking ahead and making preparations for the worst-case scenario of a 30% price increase.