Abstract

With an increasing concern over world population, energy security, volatile fuel prices and rising in greenhouse gas emissions, many countries are considering to a more friendly alternative fossil fuels. United States and also the European Union has already introduce of legislation mandating the use of biofuels in the energy mix. This action has stimulated the demand for vegetable oils. Malaysia is currently the largest palm oil exporter and the second largest producer after Indonesia has launched her palm-based biodiesel blending mandate of 5 percent (B5) in year 2011. However the mandate has not been implemented nationwide. Thus, this study, therefore seeks to contribute to our understanding of the impacts of various blend mandates specifically B5, blending mandate of 7 percent (B7) and blending mandate of 10 percent (B10) on the Malaysian crude palm oil market stock and price.  A system dynamics model was developed for the Malaysian palm oil industry which provides a framework to understand the feedback structure and how changes in various blend mandates impact the behaviour of the crude palm oil stock and price. This research suggests that increasing the blending rate is not a favourable policy, although it managed to decrease the crude palm oil stock to the targeted level but it does not contribute to palm-based biodiesel industry production due to loss in terms of profitability because of high crude palm oil prices.

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