Does biodiesel demand affect palm oil prices in Thailand?

• Increases in biodiesel blends in Thailand help farmers' income and currency saving.
• Biodiesel contributes marginally to increase in bottled palm oil prices.
• Promotion of biodiesel leads to fossil fuel savings and energy diversity.

As production of biofuels from agricultural commodities is expanding, concerns about social and environmental implications are also rising. The production of biofuels may lead to both positive and negative socio-economic impacts. This paper analyzes the impacts of biodiesel demand on the price of oil palm and associated products using demand and supply function model. The impacts cover positive impacts i.e. currency savings and increase in farmers' income due to higher price of oil palm, and negative impacts i.e. increase in food price represented by bottled palm oil, and biodiesel for energy. The biodiesel blending ratios of 3, 5 and 10%, namely B3, B5 and B10, respectively are studied. The result reveals that the biodiesel implementation in Thailand has a minimal effect on palm oil price. Though the net socio-economic impact is negative, biodiesel has a positive contribution towards reducing fossil fuel demand and energy diversity.