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Crude Oil’s Collapse Seen Causing Indonesia to Miss Biofuel Goal

From Bloomberg

By Yoga Rusmana and Eko Listiyorini.
March 1, 2015.

The collapse of crude oil amid a global surplus has led a decline in fossil-fuel costs that’s cut the appeal of producing energy from plants. Indonesia’s new government led by Joko Widodo approved an increase in the biodiesel subsidy last month, spurring analysts including Mandiri to forecast the change would help to raise domestic palm oil use at a time of expanding output and weaker demand from buyers such as China.

“It’s a hard time for biodiesel producers,” Bangun said in an interview on Feb. 18 at the Jakarta headquarters of the group, which represents everyone in the industry from growers to makers of cooking oil and chemicals. While the increase in the subsidy will add to the appeal of biodiesel, demand will be sluggish because of pressure from low crude prices, he said.

Palm futures on Bursa Malaysia Derivatives, where the benchmark contract trades, lost 15 percent to 2,373 ringgit ($654) a ton over the past year as Brent crude sank 44 percent to $61.99 a barrel. Palm surged the most in four years on Feb. 5 after the subsidy increase to 4,000 rupiah (31 U.S. cents) a liter from 1,500 rupiah. Prices rallied to the highest since July on Monday as China cut interest rates and the ringgit fell.

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