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KUALA LUMPUR, May 5 -- The government’s implementation of the B20 programme planned earlier this year may not be economical to proceed this year based on the current low crude oil price, said the Malaysian Palm Oil Council (MPOC).
Additionally, the COVID-19 pandemic has spread to over 190 countries and is having a noticeable impact on global economic growth while the crude oil price has plunged by half to below US$30 per barrel, further delaying the government's B20 agenda.
This is simply because the implementation is not economical as a widening price discount of crude oil to crude palm oil (CPO) price would make it more costly for biodiesel blending, which consists of 20 per cent palm methyl esters and 80 per cent of petroleum diesel.
The MPOC said biodiesel was meant for usage in the local transport sector, which is proven to be environmentally friendly and can reduce greenhouse gas emissions.
“In early 2020, MPOC projected that Malaysian palm oil consumption will be at 3.7 million tonnes, which is an increase of 5.9 per cent compared to 3.6 million tonnes in 2019.
“However, due to the COVID-19 pandemic, which is certain to result in lower overall domestic consumption, it is projected that Malaysian palm oil consumption is revised to 3.35 million tonnes, a drop by 6.1 per cent compared to 2019,” the MPOC said in an article titled “Outlook of Malaysian Biodiesel Mandate in 2020” posted on its website.
Previously, the B20 biodiesel mandate was expected to utilise 1.3 million tonnes of CPO but with the deferment of this programme, there would be a higher volume of unutilised CPO.
As a result, it said palm oil stock level was likely to be higher by the end of this year and this would be further exacerbated by the slow palm oil demand from importing countries.
Meanwhile, biodiesel exports is expected to be reduced this year and if the government wished to push through the B20 biodiesel blending programme, more fund allocation will be needed to cover the shortfall.
The crude oil price has an influence on prices of major commodities such as palm oil, soybean oil, rapeseed oil and sunflower oils, and they were not spared from the aftermath and registered declines following the drop in crude oil price.
“The main reason for the downward shift is that the CPO price has a positive correlation with crude oil price and palm oil is the most used vegetable oil for biodiesel blending. Any movement in crude oil, whether positive or negative, would have an impact on the palm oil price,” it added.
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