KUALA LUMPUR - Malaysia will increase the use of biodiesel to deal with fuel supply challenges caused by the Middle East crisis.

Economy Minister Akmal Nasir said the government plans to raise the current B10 biodiesel mandate to a 15% blend.

He said the move will begin with a 12% blend using existing facilities and without extra production costs.

The minister did not specify which sectors will be involved in the higher biodiesel usage.

Malaysia, the world’s second-largest palm oil producer, currently applies B10 for the transport sector.

Higher blends of 20% are already used in areas such as Labuan, Langkawi and Sarawak, except in Bintulu.

“The government believes that the use of biodiesel will further extend the availability of the country’s diesel supply,” Akmal said during the global crisis briefing on April 14.

He warned that the labour market may face pressure in the second quarter.

He said prices of animal feed may rise by about 8%, while fertiliser costs could increase by 15 to 20%.

Rising production costs may lead to higher prices for consumers.

Malaysia’s aviation and tourism sectors are also affected by the conflict.

Inbound air travel from the Middle East is expected to drop to about 1.5 million passengers in 2026.

Government spending has increased as it continues subsidies to keep fuel prices stable.

The Finance Ministry said it will spend RM7 billion on subsidies in April.

The government also plans to raise cash support for paddy farmers and provide more aid for diesel use in agriculture and transport.