Jakarta. Indonesia, the world’s largest producer of palm oil, is turning inward. Despite rising demand from countries such as Egypt, Pakistan, Russia, and Belarus, Jakarta plans to prioritize domestic use of the commodity to advance its biofuel agenda.

President Prabowo Subianto has made energy self-sufficiency as a pillar of his Asta Cita national transformation agenda by ramping up production of palm-based biodiesel and aviation fuel.

“Palm oil is a miracle crop. Some ask why we focus on it; the answer is simple: It benefits the Indonesian people,” he said during the 2026 National Coordination Meeting for Central and Regional Governments in Bogor, West Java on Monday.

Under the new policy, crude palm oil (CPO) and its by-products will primarily serve local energy needs. Even waste oil, including used cooking oil, is being redirected toward aviation fuel production, with exports curtailed. “Biofuels for Indonesians first,” Prabowo declared.

Palm oil is more than a cooking ingredient. The government has identified it as a strategic commodity capable of generating dozens of downstream products. Jakarta has earmarked two palm-based projects — oleofood and bio-aviation fuel — from a list of 18 priority downstream initiatives in 2026, attracting Rp618 trillion ($36.86 billion) in investment and promising 276,000 jobs.

Indonesia drew Rp 62.8 trillion in palm oil investments last year, all aimed at developing higher-value products from the nation’s key agricultural export.

The emphasis on biofuel is partly a response to global energy volatility and domestic energy needs. “We can make diesel and aviation fuel from palm oil. Those who prefer gasoline can pay international prices. Meanwhile, ordinary Indonesians benefit from affordable, locally produced fuel,” Prabowo said.

The country has what it calls the B40 policy, which mandates a 40% palm oil blend in its biofuel. 

Energy Minister Bahlil Lahadalia has said that the government would raise the mandatory blend to 50% in the second half of this year — a move better known as the B50 — if the tests are a success. Senior minister Airlangga Hartarto recently revealed that the timeline of the B50 policy would still be subject to “continuous reviews”, citing the price dynamics in fuel oil and palm oil.

Industry players caution, however, that production constraints could complicate the government’s ambitions. Eddy Martono, chairman of the Indonesian Palm Oil Association (Gapki), said output has stagnated over the past five years.

“If we push biodiesel consumption without increasing production, exports will inevitably bear the brunt, not domestic supply,” he told a seminar in Yogyakarta recently. Intensification of production, he added, is essential to meet both domestic and international demands.

Indonesia’s palm oil sector remains a key foreign exchange earner. According to the Central Statitsitics Agency (BPS), exports of CPO and its derivatives totaled $24.42 billion in 2025, up nearly 22% from 2024. Export volumes rose 9% to 23.61 million tons. December alone saw a record monthly surge, with shipments hitting 2.75 million tons, a 102% increase over November and a 67% rise year-on-year.

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