Palm oil prices are projected to stay high for years, driven by a slowdown in production growth and Indonesia's increased utilization of the commodity for biodiesel. As the leading global producer, Indonesia has elevated its biodiesel mandate to forty percent, with intentions for further increments. This transition, combined with limited plantation expansion and aging trees, has reduced exports and propelled palm oil prices above those of competing oils. India, the largest importer, has experienced a surge in crude palm oil prices from under five hundred per metric ton in 2019 to over one thousand one hundred.

The growth in palm oil production has decelerated to merely one percent annually, a stark contrast to the rapid expansion seen in previous decades. Malaysia faces restrictions on new plantation areas, while Indonesia has limited land development. Replanting efforts are sluggish as farmers are deterred by high costs and lost earnings during the maturation of trees. The global supply gap is increasing as demand from the biofuels and industrial sectors rises, raising concerns about potential long-term shortages and inflationary pressures.

Experts in the industry caution that unless new planting permits are issued in Indonesia, ongoing shortages will be likely, maintaining elevated prices. As palm oil continues to be a vital component in food, cosmetics, and fuel, its rising costs may lead to increased prices for alternative oils such as soybean and sunflower, impacting billions of consumers around the globe.