Literature Review

1. Mohammadi, Fatimah, Bilash, Abdulla (2015) carried out research on the topic
System Dynamics Analysis of the Determinants of the Malaysian Palm Oil Price to
investigate the major determinants of the Malaysian palm oil price using a system
dynamics approach. The simulation results indicate that the Malaysian CPO price is
significantly affected by the local CPO production as well as the world CPO and
soybean oil prices. It is also found that CPO price is less sensitive to biodiesel
production, as biodiesel currently accounts for small portion of total CPO demand in
Malaysia.
2. Biodiesel from palm oil based appears to be a practicable long term solution for
Indonesia to overcome the drop in world palm oil price for the past four years and to
provide an alternative renewable energy source to strengthen the countrys energy
security. Although the fuel may offer many advantages as a direct fossil diesel fuel
substitute, it also possesses several disadvantages such as higher price compared to
mineral diesel fuel and fluctuation in raw material price. It might also accelerate the
current tropical deforestation in Indonesia due to rapid development of palm oil
plantations. Therefore, a comprehensive national energy policy should be formulated.
The role of the government of Indonesia (GOI), along with the active participation of
the palm oil business community, is crucial to the success of biodiesel development in
Indonesia.
3. Findings indicated that the reduction of export duty raises domestic CPO price, PPO
price, expected profitability and production. However, exports of PPO declined. Even
though reduction of export tax on CPO would raise the profitability, it may not be
fully sufficient to ensure advantages of tax reduction unless further activities are done.
For instance, considering the insufficiency of land for oil palm, efficiency and
productivity need to be enhanced in upstream and midstream. Low productive trees
which are over 26 years have to be replanted.
4. This study examines volatility spillovers from soybean oil (SO) futures market to both
crude palm oil (CPO) spot and futures markets by adopting the trivariate volatility
spillover model for the period of 2ndJanuary 2004 31st December 2013. Time series
of data are collected for Malaysia CPO spot and futures prices, and Chicago Board of
Trade (CBOT) listed SO futures prices. A number of important findings are found:
a) There is a presence of a long-run equilibrium relationship between SO futures
and CPO futures markets, but not between SO futures and CPO spot, and
between CPO futures and CPO spot prices
b) Markets seem to respond strongly to bad new rather than to good news
c) Volatility of CPO spot market in the current period is found to be affected by
volatility of CPO futures market in the previous period, and vice versa

I.

Mohammadi, Sahra, Fatimah Mohamed Arshad, Bilash Kanti Bala, and Abdulla
Ibragimov. "System Dynamics Analysis of the Determinants of the Malaysian Palm
Oil Price." American Journal of Applied Sciences 12, no. 5 (2015): 355.
http://econ.upm.edu.my/~fatimah/Sahra%20et%20al%20System
%20Dynamics%20Analysis%20of%20the%20Determinants%20of%20the
%20Malaysian%20Palm%20Oil%20Price%202015.pdf.

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V.

Rahmadi, A., and Lu Aye. "Biodiesel from palm oil as an alternative fuel for
Indonesia: opportunities and challenges'." 41st Annual Conference of the Australian
and New Zealand Solar Energy Society, Destination Renewables: from Research to
Market. 2003.
Abdulla, I., Arshad, F.M., Bala, B.K., Noh, K.M. and Tasrif, M., 2014. IMPACT OF
CPO EXPORT DUTIES ON MALAYSIAN PALM OIL INDUSTRY. American
Journal of Applied Sciences, 11(8), p.1301.
Sy, Malick, Larry Li, and L. Nguyen. "Volatility spillover from soybean oil futures to
crude palm oil spot and futures: An empirical evidence." DERIVATIVE MARKETS
2015. Auckland Centre for Financial Research, 2015.