Indonesia prioritizes palm oil for domestic biofuel to boost energy security, jobs
03/02/2026 (Indonesia Business Post) - Indonesia, the world’s largest palm oil producer, is shifting its focus toward domestic use of the commodity as part of a broader push for energy self-sufficiency, even as overseas demand continues to rise.
President Prabowo Subianto has placed energy independence at the center of his Asta Cita national transformation agenda, with palm oil positioned as a cornerstone for expanding biodiesel and sustainable aviation fuel production.
Speaking at the 2026 National Coordination Meeting for Central and Regional Governments in Bogor, West Java, on Monday, February 2, 2026, Prabowo described palm oil as a strategic asset for the country. He said the government’s emphasis on palm-based energy is aimed at maximizing benefits for Indonesians rather than export markets.
Under the new direction, crude palm oil (CPO) and its derivatives will be prioritized for domestic energy consumption. Even used cooking oil and other waste products are being redirected toward aviation fuel production, limiting their availability for export. The policy underscores the government’s stance that locally produced biofuels should first serve national needs.
Palm oil has been identified as a key driver of downstream industrial development. From a list of 18 priority downstream projects set for 2026, the government has selected two palm-based initiatives − oleo food and bio-aviation fuel − with a combined investment target of Rp618 trillion (US$36.86 billion). These projects are expected to create around 276,000 jobs.
Indonesia attracted Rp62.8 trillion in palm oil-related investment last year, largely focused on producing higher-value downstream products from its flagship agricultural commodity.
The biofuel push is also seen as a response to global energy price volatility and rising domestic demand. Indonesia currently applies the B40 policy, which mandates a 40 percent palm oil blend in biodiesel.
Energy and Mineral Resources Minister Bahlil Lahadalia has said the government plans to raise the blend to 50 percent − known as B50 − in the second half of the year, pending successful trials. Coordinating Minister for the Economy Airlangga Hartarto has noted that the timing of B50 implementation will continue to be reviewed, taking into account price dynamics for fuel and palm oil.
Industry representatives have welcomed the direction but cautioned about supply constraints. Indonesian Palm Oil Association (Gapki) chairman Eddy Martono said national output has remained largely flat over the past five years, warning that higher biodiesel consumption without production growth could pressure export volumes. He stressed that productivity intensification is critical to meeting both domestic and international demand.
Despite the domestic pivot, palm oil remains a major source of foreign exchange. Data from Statistics Indonesia (BPS) show that exports of CPO and its derivatives reached US$24.42 billion in 2025, up nearly 22 percent from the previous year. Export volumes rose 9 percent to 23.61 million tons, with December recording a sharp surge to 2.75 million tons, more than double the previous month and 67 percent higher year on year.