Palm oil prices are anticipated to stay elevated for several years, driven by reduced production growth and Indonesia's increasing utilization of palm oil for biodiesel. Being the largest producer globally, Indonesia has elevated its biodiesel mandate to forty percent and intends to make further increases. This transition, combined with limited plantation expansion and aging trees, has decreased exports and pushed palm oil prices above those of competing oils. In India, the top buyer, crude palm oil prices have surged from under five hundred dollars per metric ton in 2019 to more than one thousand one hundred.

The annual growth rate of palm oil production has slowed to just one percent, significantly lower than the rapid growth observed in previous decades. Malaysia faces space constraints for new plantations, while Indonesia has imposed limits on land development. Replanting efforts are lagging as farmers are hesitant due to high expenses and lost revenue during the maturation period of trees. As demand from biofuels and industrial sectors increases, the global supply gap is expanding, raising concerns about potential long-term shortages and inflationary pressures.

Industry analysts caution that without the issuance of new planting permits in Indonesia, sporadic shortages are likely to persist, keeping prices high. Given that palm oil is a crucial component in food, cosmetics, and fuel, its escalating cost could drive up prices for alternative oils such as soybean and sunflower, impacting billions of consumers across the globe.