July 5, 2007 – (AP) KUALA LUMPUR, Malaysia: Malaysia will enforce the mandatory blending of biofuels, such as a mix of palm oil and diesel, with conventional petroleum products within a year, a government official said Thursday.
Minister for Plantation Industries and Commodities Peter Chin said the biofuel blending program will include a government subsidy to make it viable despite sharply higher palm oil prices in recent months.
Palm oil is a key ingredient used by the Malaysian biofuel industry, and its price hit a record high last month amid expectations of rising demand from the biofuels industry.
Several biofuel producers have said it might not make sense to produce palm oil-based biofuel now because the cost of the ingredient is nearly as much as that of the end product itself.
Chin, speaking at a biofuels conference, did not give any indication on the extent of subsidy the government plans to give.
Malaysia and neighboring Indonesia are the world’s largest producers of palm oil.
Officials have said the fruit’s oil on its own or in diesel mixtures has been used to power private vehicles in Malaysia since 1984. Some palm oil factories in rural plantations have used the waste from processing edible oil to run their tractors or other equipment.
Sabri Ahmad, chairman of the Malaysian Palm Oil Board, said Thursday that palm oil prices are expected to remain firm because of robust demand from China and India amid a slowdown in production in Malaysia and Indonesia.