Impact Of Biodiesel Demand On The Malaysian Palm Oil Market

One of the new elements in the palm oil market is the growing demand for this commodity as a feedstock to biodiesel production. This new development is affecting the dynamics of the market, in particular, the supply and demand sectors of this commodity. The general objective of the study is to investigate the impact of biodiesel demand on the Malaysian palm oil market. The study uses econometric modelling involving simultaneous system of nine structural equations and four identities. The estimators of the structural parameters were derived with the two stage least squares (2SLS) method using annual data for the period 1976-2009. The palm oil stock, palm oil world price, biodiesel demand and lagged domestic price are the main important variables influencing the domestic price of palm oil. The econometric simulations suggest that the biodiesel demand does bring positive economic impact on selected sub-sectors of the palm oil industry such as it encourages export, increase domestic price and hence to some extent production.

Autorentext

Dr. Shri Dewi D/O Applanaidu is a Senior Lecturer at the Department of Economics and Agribusiness, College of Business, Universiti Utara Malaysia (UUM), Sintok, Kedah, Malaysia. Her research interests are in the area of Agricultural Econometric Modeling and Health Economics.