Rising diesel prices and fuel shortages are disrupting palm fruit harvesting in Malaysia and Indonesia. Smallholders in Borneo and Sumatra have reduced harvesting activity, raising the risk of lower palm oil production if the disruption continues.
In the Malaysian states of Sabah and Sarawak, the price of unsubsidized diesel has risen by almost 120%. The two states accounted for 43.9% of Malaysia’s 20.28 million tons of crude palm oil production in 2025. Subsidized diesel is available at US 51 cents (MYR 2.10) per liter, but the monthly allocation is capped at 200 liters, well below the 500 liters or more that farmers say they need.
Higher fuel costs have forced some farmers to reduce their harvesting frequency from around 2.5 rounds per month to between one and 1.5 rounds. The added burden includes not only transport costs but also the expense of operating generators and other machinery. Industry representatives warned that Sarawak’s yields could fall by 15–20% if the situation continues.
In Indonesia, diesel shortages since mid-July have restricted operations in Sumatra, which accounts for 55% of the country’s palm oil output. Vehicles and equipment used on the plantations depend on diesel, and harvesting intervals have lengthened from the usual eight to ten days to between eight and twelve days.
Source: Reuters
PSR Analysis. Palm oil is produced by pressing fresh fruit bunches harvested from oil palm trees. Its uses extend well beyond bottled cooking oil. It is found in margarine, confectionery, baked and processed foods, while palm-based ingredients are also used in soap, detergent, cosmetics, industrial products and biodiesel.
Lower output in Malaysia and Indonesia can therefore affect a wide range of consumer and industrial supply chains.
Once a fruit bunch is cut, it must be collected from the plantation, moved to a loading point and transported by truck to a mill. The bunches deteriorate quickly and normally need to be processed within 24 hours. The role of diesel in this process is direct: it powers plantation transport vehicles, trucks, agricultural equipment and, in some remote operations, generators.
In eastern Malaysia, the problem is the cost of diesel. In Sumatra, it is the availability of diesel. Neither problem directly affects the growth of the oil palm trees. Instead, it reduces how often farmers can harvest, collect and transport the fruit, leaving less feedstock available for the mills.
The effect on equipment demand is mixed. More expensive diesel makes fuel-efficient machinery more attractive, but it also weakens smallholders’ cash flow and their ability to invest. Many operators may keep older machines in service longer, supporting parts and repair activity while delaying new equipment purchases.
Electrification is not an immediate answer in remote plantation areas where grid supply and charging infrastructure remain limited. For the foreseeable future, fuel efficiency, durability, ease of maintenance and fuel monitoring will carry more weight in purchasing decisions. PSR
Akihiro Komuro is Research Analyst, Far East and Southeast Asia
