A System Dynamics Approach to Analyze Biodiesel Production and Oil Import Dependency in Indonesia

Abstract

Indonesia’s persistent dependence on imported diesel fuel poses significant challenges to national energy security, fiscal stability, and exposure to global market volatility. In response, the government plans to implement a mandatory B50 biodiesel blending policy starting in 2026 to reduce diesel imports by leveraging domestic bioenergy resources. While higher blending mandates are often assumed to directly lower imports, existing studies largely rely on static or deterministic approaches that inadequately capture feedback dynamics and long-term uncertainty. This study addresses this gap by integrating system dynamics modelling with Monte Carlo simulation to analyze the impact of biodiesel blending policies on diesel import dependency under structural and parametric uncertainty. The model incorporates biodiesel production growth, domestic allocation after exports, diesel demand growth, and blending effectiveness within a feedback-based framework calibrated using historical data from 2013 to 2024. Simulation results indicate that the B50 policy consistently reduces diesel import requirements relative to the baseline; however, absolute imports may continue to rise without sufficient domestic supply expansion. Cumulative results show that by 2035, the B50 policy achieves import reductions of approximately 55–58 million kiloliters, increasing to around 60 million kiloliters when combined with accelerated biodiesel production growth. Monte Carlo analysis reveals robust medium-term outcomes by 2030 but increasing uncertainty by 2035. The findings highlight that blending mandates must be accompanied by sustained supply-side development to ensure long-term effectiveness and resilience.