Malaysia’s move to introduce B15 biodiesel blends could help reduce costs, control inflation and lower government spending on fuel subsidies, according to CGS International Securities Malaysia Sdn Bhd.
The investment firm said the use of cheaper palm oil as a feedstock could significantly reduce the financial burden of the biodiesel programme. It estimated that the government’s fiscal cost could decline by more than RM1 billion in 2026 due to the price advantage of palm oil compared with gasoil, The Star reported.
In its Economic Focus report, CGS International said savings from biodiesel could provide some relief to government finances, especially during periods of high diesel prices and increased subsidy pressure.
However, the firm warned that challenges could emerge if market conditions change and palm oil prices rise above gasoil prices. Such a situation could increase costs for consumers and place additional pressure on government finances, affecting the objective of controlling inflation and reducing expenses.
The firm highlighted that energy security has become an important priority amid global geopolitical tensions and concerns over oil supply disruptions. It said biodiesel could serve as a strategic option by reducing dependence on imported diesel and improving fuel supply stability.
According to CGS International, while biodiesel may require higher government spending in some situations, the benefit of securing energy supplies and reducing future risks could justify the investment.
The report also pointed out that Malaysia’s biodiesel infrastructure needs major improvements to support higher blending levels. Upgrades would be required for storage facilities, blending systems and distribution networks to ensure reliable fuel supply.
The Ministry of Plantation and Commodities has estimated that the industry may need around RM643 million in depot upgrades to increase palm oil content in biodiesel from the current B10 level to B20.
CGS International noted that private companies may be reluctant to invest in additional infrastructure due to limited refinery margins, while government financial limitations could also affect policy implementation.
The introduction of B15 is expected to increase domestic palm oil consumption by an additional 300,000 to 400,000 tonnes annually. This would be added to the existing 930,000 tonnes consumed under the B10 mandate, taking total biodiesel programme consumption to around 1.3 million tonnes.
The additional demand could help reduce palm oil stocks, which stood at around 2.4 million tonnes at the end of May 2026. Compared with Malaysia’s annual palm oil production of about 20 million tonnes, the B15 programme could absorb up to seven per cent of total output.
