Accounting for Two-Thirds of Additional World Consumption, Indonesia is The Main Driver for Biofuel Production
In 2020, the United States produced 1,347 petajoules of biofuel, making it the world's largest producer. With statistics of around 884 and 283 petajoules, Brazil and Indonesia came in second and third, respectively.
By comparison, in that year, Germany produced about 146 petajoules of biofuel, making it the largest producer in Europe and one of the top five producers overall.
The UN Food and Agriculture Organization, FAO, and the Organization for Economic Cooperation and Development, OECD, stated in their annual outlook report that Indonesia, one of the largest producers, will be the primary driver of the increasing use of vegetable oil as feedstock for biodiesel in the coming decade.
In order to reduce its fuel imports and increase domestic palm oil production, Indonesia, the largest producer and exporter of palm oil, mixes 30% palm oil-based gasoline into its biodiesel under its "B30" mandate.
According to the FAO and OECD Agricultural Outlook 2021–2030, "the consumption of biodiesel is predicted to rise by 7% over the coming decade, with Indonesia accounting for two-thirds of the additional demand."
According to the analysis, which cited encouraging domestic policies, the usage of vegetable oil to manufacture biodiesel in Indonesia is expected to increase 23.2 percent to 7.9 million mt between 2021 and 2030.
Due to record-high palm oil prices and decreased fuel usage, the Indonesian government has delayed the execution of its mandate to boost the blending of palm oil to 40 percent, or "B40," until 2022.
Over the projection period of 2021–2030, the FAO–OECD outlook anticipates Indonesia's biodiesel blending rate to remain at or near 30%.
The use of palm oil as a feedstock for biofuels is expected to drop in the European Union, the largest market for biodiesel, as a result of restrictions placed by its updated Renewable Energy Directives, or RED II.
Given that nearly 14% of the world's supply of vegetable oil is used to produce biodiesel, biofuel regulations in the United States, the European Union, and Indonesia continue to be a significant source of uncertainty for the vegetable oil industry, according to the forecast.
According to the analysis, the aging of oil palm trees in Indonesia and Malaysia and growing attention to sustainability issues will cause a decline in palm oil production.
According to the analysis, global palm oil production is anticipated to increase by 18% from 2020 to 90 million mt in 2030.
Land availability will be the main barrier to expansion, according to the FAO and OECD, despite the possibility that investments in the palm oil sector may be stimulated by the price increase over the past year and Indonesia's blending mandate.
About 85% of the world's supply of palm oil comes from Indonesia and Malaysia.
Source: Statista.com, S&P Global Commodity Insights