Jakarta. Indonesia's rollout of its B50 biodiesel program is expected to reduce the country's dependence on imported diesel fuel, but it could also trim palm oil export revenue by about $2.7 billion a year by diverting more crude palm oil (CPO) to domestic energy production.

The mandatory fuel blend, which raises the palm oil content in biodiesel to 50%, began phased implementation on July 1 following an eight-month trial period.

According to estimates from the Indonesian Palm Oil Association (Gapki),  the policy could reduce CPO exports by about 2 million metric tons in the second half of the year as additional supplies are absorbed by the biodiesel program.

If implemented for a full year, the additional domestic CPO requirement could approach 4 million metric tons, according to the industry group's estimates.

Based on the average CIF Rotterdam palm oil price of approximately $1,356 per metric ton during January-March 2026, diverting 2 million metric tons from export markets would represent forgone export revenue of roughly $2.7 billion.

Economist Achmad Nur Hidayat of UPN Veteran Jakarta said on Tuesday that the policy should be evaluated carefully as Indonesia's trade balance weakens. The country recorded a $1.6 billion monthly trade deficit in May, ending a six-year streak of monthly trade surpluses.

He also noted that palm oil is a strategically important commodity because it is the primary raw material for cooking oil consumed by most Indonesian households.

According to Achmad, the B50 program will improve Indonesia's external balance only if savings from lower diesel imports consistently exceed the loss of palm oil export earnings, biodiesel subsidy costs, and the risk of higher domestic cooking oil prices.

“The objective of the B50 program is understandable because Indonesia has long been vulnerable to diesel imports,” he said. “When global oil prices rise, pressure on the state budget increases, the oil and gas trade deficit widens, and energy subsidies become more expensive.”

Rather than applying a rigid mandatory 50% blend, Achmad recommended a flexible mechanism that adjusts biodiesel blending rates according to domestic CPO inventories, palm oil and cooking oil prices, and the country's trade balance.

“If domestic stocks become tight and food prices rise, the biodiesel blend should be reduced. Conversely, when production increases and export prices weaken, biodiesel consumption can be expanded,” he said.