Global cooking oil prices are expected to remain high as declining palm oil production and Indonesia’s increasing focus on biodiesel drive costs upward, eliminating the discount advantage palm oil traditionally held over rival oils.

Palm oil, a key ingredient in food products, cosmetics, and cleaning supplies, accounts for over half of global vegetable oil exports. It has long been favored in emerging markets, particularly in India, due to its affordability.

However, years of low prices driven by surplus production and market competition are ending, industry expert Dorab Mistry warned.

“Those days of $400-per-ton discounts are gone,” said Mistry, a director at India’s Godrej International. “Palm oil won’t be that cheap again as long as Indonesia keeps prioritizing biodiesel.”

The shift is driven by Indonesia’s decision to increase its mandatory palm oil blend in biodiesel to 40 percent this year, with a potential rise to 50 percent in 2026. The country is also planning a 3 percent blend for jet fuel next year to reduce fuel imports.

These policies will cut Indonesia’s palm oil exports to 20 million metric tons by 2030, a sharp drop from 29.5 million in 2024, according to Eddy Martono, chairman of Indonesia’s palm oil association GAPKI.

As a result, palm oil has been trading at a premium over soybean oil, reversing historical trends. In India, crude palm oil has commanded a premium of over $100 per ton compared to crude soybean oil, a stark contrast to late 2022, when palm oil was over $400 cheaper.