InfoSAWIT, JAKARTA - As a source of cooking oil, palm oil has many advantages over other vegetable oils. Its primary advantage is being a safe and healthy cooking oil, complemented by the most efficient selling price. Additionally, palm oil is recognized as a renewable energy source, particularly in biodiesel production, which will be consumed through the mandatory B40 program starting in early 2025.
The presence of palm oil as a cooking oil source has led to various new perceptions. Since its use as a raw material for biofuels, palm oil has faced numerous questions and accusations regarding its supply context.
However, the debate over Food vs. Fuel seems increasingly irrelevant, as since the implementation of the B5 to B35 mandates last year, crude palm oil (CPO) has consistently been supplied as a biodiesel raw material. Moreover, the availability of cooking oil made from CPO has always met other needs.
Interestingly, the growth of the biodiesel industry, despite the increasing market for government-mandated assignments, has not been particularly expansive. What is the reason behind this?
Conversely, the largest growth has come from the cooking oil industry (refineries), which continues to expand. The number of cooking oil factories has increased, moving from urban residential areas to locations closer to the raw material sources produced by palm oil plantations.
This new phenomenon is encouraging for the wider community. The growth of many new cooking oil factories in various locations benefits consumers, as the distribution of cooking oil products, which previously faced logistical challenges, is now widespread and easily accessible.
However, the current cooking oil factories still face classic problems, where installed production capacity operates below market demand for palm oil cooking oil. As a result, the production of palm oil cooking oil in Indonesia remains relatively expensive.
On the other hand, cooking oil factories in other countries, especially those importing Indonesia's CPO, are increasingly ramping up palm oil production. Generally, these factories utilize raw material supplies from other vegetable oils and alternative raw materials from CPO. Consequently, their production of vegetable cooking oil is much more efficient, as they can maximize their existing capacity.
As a result, Indonesian palm oil cooking oil has lower competitiveness compared to palm oil cooking oil produced directly in factories located in certain countries. Therefore, the export market for Indonesia's CPO remains promising for the future.
Despite seeming contradictory to the food and energy security needs in Indonesia, self-sufficiency in palm oil cooking oil has long been achieved. Meanwhile, the supply of biodiesel to meet the B35 mandate last year has also been consistently fulfilled. This means that the supply of raw materials such as CPO will always be met through production from national palm oil plantations, which are widely spread from Sumatra to Papua.
Thus, the mandatory market needs for 2025, which will become B40, will only require a 5% increase in raw material supply compared to the previous year. On the other hand, Indonesia's CPO production continues to grow annually by around 5% to 11%. Therefore, the downstream palm oil industry in Indonesia must continue to develop.
Downstream Palm Oil Supports Food and Energy Security
The primary need for the development of the Palm Oil Downstream Industry (IHKS) actually stems from Indonesian government regulations. Often, regulatory changes occur without considering the industry's conditions. The government's tendency to view issues based solely on data and explanations in meeting rooms neglects the real conditions on the ground.
In the context of IHKS development, food and energy can be seen as a unified vision for its growth. The palm oil industry has unique characteristics that cannot be equated with other vegetable oil industries. For instance, palm oil is the only vegetable oil with the most comprehensive carbon chain.
This comprehensive carbon chain should be the main reference for implementing various government regulations. The focus of IHKS development can be driven by the advantages of each region. For example, North Sumatra Province can promote IHKS development through an integrated Palm Oil Industrial Zone. This way, the needs for cooking oil and biodiesel can be met within a specific area.
Referring to President Prabowo's direction during the National Development Planning Consultation (Musrenbangnas) for the 2025-2029 RPJMN, he expressed optimism that palm oil will continue to be a backbone of Indonesia's economy. President Prabowo also urged all elements of the nation to safeguard this commodity as a strategic asset capable of leading Indonesia towards economic independence.
Let us work together to safeguard palm oil and realize Indonesia's food and energy security!
Author: Ignatius Ery Kurniawan/Editor-in-Chief of InfoSAWIT
Editorial of InfoSAWIT Magazine, January 2025 Edition
