What Changed

Indonesia's commodity restrictions just became permanent policy. At the 2026 National Coordination Meeting (Rakornas) in Sentul, West Java on February 2, President Prabowo Subianto announced that the crude palm oil mill effluent (POME) and used cooking oil (UCO) export ban will remain in place indefinitely. According to Fastmarkets, Prabowo said: "I'm sorry for the other nations. I ban the exports of palm oil wastes."

The Aviation Fuel Play

Prabowo moved beyond defending the ban to reveal the next target: sustainable aviation fuel (SAF). According to Fastmarkets, he stated that Indonesia "aims to become one of the largest producers of aviation fuel derived from bio-based materials," adding: "We will be the largest aviation fuel producer. We can be the largest in the world."

UCO and POME are primary SAF feedstocks globally. By restricting exports, Jakarta is positioning itself to capture the entire value chain — from the palm field to the jet engine — rather than shipping raw material overseas for foreign refiners to profit from.

How We Got Here: A Quick Recap of the New Facts

The export restrictions on crude POME and UCO first went into effect in January 2025, according to Advanced BioFuels USA reporting by Reuters' Bernadette Christina. The initial trigger was domestic: Indonesia's new B40 biodiesel mandate — requiring 40% palm oil-based fuel blended with diesel, up from 35% — needed guaranteed feedstock supply.

There was also a fraud component. Indonesian officials alleged that Minyakita, the government's subsidized cooking oil program, was being mislabeled as UCO and exported overseas. Government-subsidized oil intended for Indonesian families was apparently being resold abroad for biodiesel feedstock profits. The January 2025 regulation requiring export allocations from government ministries addressed that scheme.

Fast forward to February 2026: Prabowo confirmed the crude ban stays. Refined POME and UCO grades can still be exported for now — but according to Fastmarkets, market participants are watching closely for whether that exemption survives.

The Fiscal Pressure

Indonesia is under serious fiscal strain. According to Mongabay reporting by Hans Nicholas Jong, the U.S.-Israel war on Iran has sent global oil prices above $100 a barrel — a major problem for a country that imports roughly 800,000 barrels of oil per day (consuming ~1.5 million but producing less than 700,000).

The Institute for Development of Economics and Finance (INDEF), a Jakarta-based think tank, calculated that every $1 increase in oil prices widens Indonesia's fiscal deficit by approximately $400 million. With prices surging in early 2026, that additional burden could hit $3 billion.

Indonesia is simultaneously trying to build a SAF export industry while hemorrhaging cash on oil imports. The biofuel push serves dual purposes: economic positioning and fiscal relief. Domestic biofuel production reduces the import bill. The B40 mandate alone displaces hundreds of thousands of barrels of imported diesel. This context remains largely absent from Western financial coverage, which tends to frame Indonesia's export controls purely as supply-chain disruption for European and American buyers.

What Markets Did

Bloomberg reported Indonesian palm oil and coal stocks dropped on the export control news, then partially rebounded ahead of Prabowo's parliamentary address. The refined-versus-crude distinction is the key variable traders are watching. Crude POME and UCO are banned. Refined products still flow. But Prabowo's language at Rakornas was broad enough that nobody is confident that line holds.

What The Coverage Misses

Most Western outlets are treating this as a commodity supply story — Indonesia tightening exports, prices go up, European biodiesel producers scramble. That's real, but incomplete.

Indonesia is running the same playbook it ran with nickel: ban raw material exports, force value-added processing to happen domestically, build the industry at home, then sell finished product at a premium. It worked with nickel. Prabowo is betting it works with palm-based fuels. The SAF market is projected to grow as airlines face regulatory pressure to decarbonize. Indonesia wants to own that feedstock supply chain before European and American companies lock up refining capacity.

Also missing from most coverage: the domestic fraud and subsidy arbitrage issue that partially drove the original January 2025 restrictions. That's a real governance problem.

What Comes Next

Indonesia just told the world its palm oil residue stays home — permanently. Prabowo has a specific end game: become a dominant aviation fuel producer using bio-based feedstocks that nobody else can access at scale. Meanwhile, a $100-a-barrel oil shock is making the case for him domestically.

For American and European buyers of SAF feedstocks, this is a supply crunch that isn't going away when oil prices normalize. Jakarta made a strategic decision. Plan accordingly.