Palm oil prices are projected to stay high for several years due to decelerating production growth and Indonesia’s expanded use of the product for biodiesel. As the world's leading producer, Indonesia has increased its biodiesel mandate to forty percent, with plans for further escalations. This transition, coupled with limited plantation expansion and aging trees, has reduced exports and led to palm oil prices surpassing those of competing oils. India, the largest importer, has witnessed crude palm oil prices soar from less than five hundred dollars per metric ton in 2019 to over one thousand one hundred.

The growth of palm oil production has slowed to a mere one percent per year, significantly lower than the rapid increases seen in previous decades. Malaysia has limited capacity for new plantations, while Indonesia has imposed restrictions on land development. Replanting efforts are progressing slowly, as farmers are reluctant due to high costs and lost income during the maturation periods of the trees. The global supply gap is widening due to rising demand from biofuels and industrial markets, raising concerns about potential long-term shortages and inflation risks.

Industry experts caution that without new planting permits in Indonesia, recurring shortages will persist, keeping prices high. Given that palm oil is an essential component in food, cosmetics, and fuel, its escalating costs may also drive up prices for alternative oils such as soybean and sunflower, impacting billions of consumers around the globe.