Malaysia’s planned increase in the palm oil content of biodiesel from the current B10 to B15 is expected to benefit biodiesel producers by absorbing surplus production capacity, but will have little to no impact on industrial manufacturers’ costs, according to two industry bodies, Free Malaysia Today reported.
The Malaysian government has said the blend will be raised in stages, with an interim B12 level serving as the first step before reaching B15. The move is largely driven by rising global fuel supply risks, with nearly half of Malaysia’s crude oil imports passing through the Strait of Hormuz, a key shipping lane disrupted by the ongoing Middle East conflict. Domestic fuel subsidies have also come under pressure, with the subsidy bill expected to rise to approximately RM7 billion per month, up from RM4 billion previously.
Malaysian Biodiesel Association (MBA) president Tee Lip Teng said the higher blend mandate would directly lift demand for biodiesel and help utilise idle production capacity across the sector. Citing data from the Malaysian Palm Oil Board, he said higher blends of B12 and B15 could generate additional local demand of up to 334,000 metric tonnes per year, leading to improved utilisation rates at existing plants.
Malaysia produced just under one million tonnes of biodiesel last year under the prevailing B10 mandate — less than half of the industry’s total annual production capacity of 2.4 million tonnes. Of that output, 95 per cent was consumed domestically, with only 57,000 tonnes exported. Tee noted that voluntary uptake of biodiesel outside the mandate remained limited, driven primarily by environment, social and governance (ESG) commitments or short-term price advantages.
The MBA has separately requested the government to consider a 10 per cent sales tax exemption on biodiesel consumed outside the national biodiesel programme, which the association said would encourage wider voluntary adoption beyond the mandated blending requirement.
From a supply security perspective, Tee said every metric tonne of palm oil used in blending saved an equivalent tonne of petrodiesel, adding that Malaysia’s position as a major palm oil producer ensured a reliable domestic feedstock supply. However, he cautioned consumers against assuming biodiesel would always be cheaper than petrodiesel, noting that the cost of production was linked to palm oil prices, which could at times make biodiesel more expensive.
Federation of Malaysian Manufacturers (FMM) president Jacob Lee said the change in biodiesel blend would have only a marginal effect on industrial fuel costs for manufacturers. He pointed out that global crude oil prices remained the dominant factor in determining diesel costs, and that manufacturers had consistently operated under market-based fuel pricing since subsidised diesel was historically targeted at logistics and transport operators in eligible vehicle categories. Lee said supply reliability and price predictability were the more pressing concerns for the manufacturing sector.
Malaysia currently enforces a B10 mandate for the transport sector. Higher blends of up to B20 are already in use in certain areas, including Labuan, Langkawi, and Sarawak, with the exception of Bintulu town.
