The Malaysian government recently announced that by 2011, all vehicles in Kualampur will run on a 5% blend of palm-oil mixed with diesel. This has been delayed over the past few years due to price fluctuations.
Malaysia is the world’s second-largest exporter of palm oil after Indonesia, and the two countries account for 85 percent of global production. Being the world’s second-largest palm oil producer, this plan will be soon implemented in stages in several central states from June 2011 and the extra costs which incur will be borne by the petroleum companies. The fortunes of Malaysia’s biofuel industry waned in late 2008 when the price of crude oil tumbled, triggering a crash in the palm oil price which made supply uncertain, jeopardizing the long-term contracts and the industry needs.
The Malaysian government is very keen on implementing this as soon as practical as they very strongly believe The policy will benefit the country as biofuel is environmentally friendly and it will reduce the country’s dependence on petroleum diesel. It will also strengthen the palm oil prices and enable the planters, especially smallholders, to benefit from the stronger palm oil price. The ministry said it will discuss the implementation mechanism with petroleum companies, while the government will set up six petroleum depots with blending facilities.
The government has said the switch to biofuel will help reduce the cost of fuel in Malaysia, where petrol is subsidised, but conservationists have criticised oil palm plantations for destroying wildlife habitats. One of the challenges is meeting the sustainability criteria that are being debated worldwide .Malaysia — which aims to be the global leader in biodiesel — has approved 56 licences for biodiesel production, which account for a production capacity of 6.8 million tonnes.