February 15, 2008
BANGKOK - All diesel fuel will include a component made from palm oil. The move is to reduce costly energy imports which make product prices go up.
From February 1, Thailand began requiring that diesel vehicles run on a blend that includes two percent biodiesel, and is considering raising that to five percent within five years, according to AFP .
The switch has sent prices for palm oil soaring, leading to shortages of the commodity that is widely used for domestic cooking and in the food industry.
Palm oil is among the products on the price control list.
To deal with the shortage, the Commerce Ministry allowed a one-time import of 30,000 tonnes of palm oil to boost supplies until March, when production enters its peak season.
It also allowed a four-baht increase in cooking oil prices to 47.60 baht (1.44 dollars) per litre.
Wannaporn Martkasem, chairman of the Palm Oil Refinery Association, said floating palm oil prices would help prevent a shortage in stores.
But she warned the government had to find a better way to balance the competing demands for food and fuel.
Prices for crude palm oil have nearly doubled over the last year, jumping to 35.98 baht per kilo last month, up from 18.63 baht one year earlier.
A litre of cooking oil cost 36.32 baht in December 2007, up from 28.05 one year earlier.
Apichart Jongskul, head of the government's office of agricultural economics, said Thailand is already planning a 16 percent increase this year in land used to cultivate palm oil, expanding plantations to cover 1.4 million acres (566,000 heactares).
By 2012, that will grow to 2.2 million acres (890,000 hectares), he added.
The expansion would nearly double the amount of crude palm oil produced in Thailand, to 2.2 million tonnes, Apichart said.
"We prioritise palm oil for the food industry first. Energy and exports come second in our policy," Apichart said.
The increased production will be enough to meet the demand for both cooking and fuel as the two percent requirement kicks in.
Thailand would have to grow even more palm oil to have all diesel vehicles meet the five percent requirement.
Biofuel production is on the rise around the world as it is seen as a clean form of energy in an era of soaring oil prices and growing worries about carbon emissions blamed for climate change.
Global palm oil prices have also soared because of its popularity as an ingredient in processed foods as a substitute for trans fats, which health experts believe encourage obesity and other ailments.
