Malaysia ramps up palm oil in diesel to cut import reliance amid oil crisis

Malaysia is boosting the palm oil content in its diesel fuel to 15%, a move driven by concerns over dwindling diesel reserves and global oil supply disruptions. The increase from the previous 10% blend, known as B10, to B15, is a direct response to the ongoing Iran war and the resulting backlog of oil tankers in the Strait of Hormuz.

Plantation and Commodities Minister Noraini Ahmad has highlighted the urgency, with existing fuel stockpiles potentially lasting only until July. The Ministry of Economy is set to address the global energy crisis in a parliamentary statement. Malaysia, which imports about two-thirds of its daily 700,000-barrel oil consumption, sees this as a critical step to conserve its own diesel reserves.

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The blending of diesel and PME is done during the journey to petrol stations or factories, resulting in a more homogeneous biodiesel mixture.

A senior representative from PS Pipeline explained that each percentage point increase in palm oil methyl ester (PME) blended into diesel reduces diesel consumption by a similar amount. The shift to B15 could therefore lower overall diesel usage by approximately 5%. This strategy aligns Malaysia with other palm oil-producing nations like Indonesia and India, which are increasingly turning to biofuels to mitigate oil price shocks.

The higher blending mandate will require an estimated 800,000 tonnes of palm oil from the 4 million tonnes allocated annually for domestic consumption. This increase in biofuel usage is expected to save at least 23 million liters of diesel monthly, offering a crucial buffer as the country navigates global energy market volatility.

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Each additional percentage point of PME blended into diesel reduces diesel consumption by an equivalent amount. As such, the move to B15 could lower diesel usage by about 5%.