The decision of the world’s largest producer risks destabilizing a vegetable oil market already at its peak, following the invasion of Ukraine by Russia.
Indonesia began to apply Thursday, April 28 a complete embargo on its palm oil exports, of which the country is the world’s largest producer, at the risk of destabilizing a vegetable oil market already at its highest. The Southeast Asian archipelago has been facing a shortage and soaring prices of palm oil-based cooking oil on its domestic market for several months and fears a rise in social tensions.
In a last minute reversal on Wednesday evening, the authorities clarified that the embargo would concern all exports of the oilseed, and not only products intended for edible oils, as indicated a day earlier. “All products”including crude palm oil “are covered by a decree of the Ministry of Commerce”indicated the Coordinating Minister for the Economy Airlangga Hartarto on Wednesday evening, specifying that the embargo would begin at midnight.
As the biggest producer of palm oil, it is ironic that we have difficulty obtaining cooking oil. »
Indonesian President Joko Widodo
Indonesian President Joko Widodo stressed on Wednesday evening that the supply of the population was “highest priority”. “As the biggest producer of palm oil, it is ironic that we have difficulty obtaining cooking oil”, he acknowledged, calling on producers to cooperate. The country suffers from distribution problems while producers prefer to sell their stocks internationally to take full advantage of the rise in prices. Jakarta plans to resume exports when the wholesale price of cooking oil drops to 14,000 rupees (97 cents) in the archipelago, after soaring 70 percent in recent weeks.
The supply of palm oil, the main oil used in the archipelago for cooking, has been problematic since the beginning of the year. The most modest consumers had to wait for hours in front of the distribution centers of oil at subsidized prices in many cities of the country. Indonesia accounts for some 60% of world palm oil production, one third of which is consumed on its domestic market. India, China, the European Union and Pakistan are among its major export customers.
Palm oil is also an essential component for the manufacture of a wide range of products, from cosmetics to food products. Edible oils had already hit all-time highs in March due to insufficient global supplies following Russia’s invasion of Ukraine, two major sunflower oil-producing countries.