PETALING JAYA: As fossil diesel prices rise, attention is turning to whether Malaysia’s biodiesel blending programme can do more to cushion Malaysia from global supply shocks and what it would take to scale it up responsibly.
Malaysia Carbon Market Association president and Yinson corporate sustainability group head Dr Renard Siew said biofuels in Malaysia today play an “incremental support” role.
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Rather than acting as a core stabiliser for the energy mix, he said local B7 and B10 blends help by marginally reducing reliance on imported diesel.
“By adding a domestically sourced component, it can soften exposure to the global diesel pricing volatility,” he said.
However, he cautioned that the impact is limited because biodiesel pricing remains closely linked to crude palm oil (CPO), which is itself volatile.
“At best, they provide a thin buffer rather than a structural hedge,” he told The Star yesterday.
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Siew said scaling up biofuels faces a mix of economic, technical and structural constraints.
“On feedstock, palm oil has competing uses across food and exports, meaning greater fuel demand can create trade-offs and price pressure,” he noted.
“When CPO prices rise, biodiesel can become less cost-competitive than fossil diesel without policy support, and reducing the likelihood that higher blends would translate into lower fuel costs.”
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On the technical side, Siew said higher blends beyond B10 could raise compatibility concerns for older vehicles while storage, blending and distribution systems are not fully optimised for widespread higher-blend deployment.
He said older original equipment manufacturer standards, uneven rollout and ongoing sustainability scrutiny around palm-based fuels also influence how fast adoption could grow.
Even so, he said biofuels could still play a useful role as part of a broader strategy to manage costs and reduce exposure to future shocks, but alongside measures such as efficiency improvements and gradual electrification.
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The price of diesel has risen higher than RON95 and RON97 petrol recently, even though diesel was initially cheaper when the Middle East conflict caused the current oil shock.
Experts said this is due to petrol prices being cushioned by higher inventories and a more robust and flexible supply.
Demand for diesel is also inflexible because motorists facing high petrol prices can switch to public transport, while logistics operators have no other option but to continue using diesel.
In a related move to support industry competitiveness, the Plantation and Commodities Ministry said it will maintain the current licensing fee structure for activities regulated under the Malaysian Biofuel Industry (Licensing) Regulations 2008.
Plantation and Commodities Minister Datuk Seri Dr Noraini Ahmad said the decision has been finalised after the ministry reviewed feedback and detailed input from industry representatives, particularly the Malaysian Biodiesel Association.
“The government always takes note and understands the concerns raised by industry players, especially regarding the burden of current operating costs and various existing licensing charges,” she said in a statement yesterday.
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Separately, University of Technology Sydney energy and environmental economics professor Dr Roc Shi Xunpeng said Malaysia’s existing biodiesel blends could still matter even if their share of the overall fuel pool is relatively small.
“Even though the total volume is limited, it has significance as prices are determined by the marginal volume,” he said, adding that biofuels can “play a larger role than their volume suggests”.
Shi said a wider B20 rollout depends mainly on engine suitability and fuel availability.
He said higher blends may carry risks for certain engines, and regulators will need technical study results before moving to broader implementation.
He also cautioned against diverting too much feedstock from edible sources, saying it could compromise food security.
Waste-based biofuels are the most desirable option, he said, because they can address fuel needs and waste management at the same time, while more advanced biofuels may not resolve immediate cost pressures.
To address “food versus fuel” concerns, Shi said the priority should be to avoid food-related sources where possible.
