“In recent months, the price of crude palm oil used has surged by up to 40 percent, the result of a confluence of factors, including Russia's invasion of Ukraine, which supplies the majority of Europe's sunflower oil. With the Ukrainian sunflower oil supply disrupted by the conflict, demand for other oils like palm oil has soared,” Al Jazeera said on April 7.
Indonesia is the largest exporter of palm oil. Despite its apparent abundance of the product, Indonesia has been significantly affected by the recent increase in demand for palm oils, due to the lack of alternative sources like sunflower oil which comes from Ukraine.
“After soaring prices of crude palm oil caused prices of cooking oil [derived from crude palm oil] to spike more than 50 percent, Indonesia's government in February capped the price of a liter of oil at 14,000 Indonesian rupees ($0.93). To limit shortages, authorities also began limiting customers to 2 liters (68 fluid ounces) of oil per purchase,” Al Jazeera recalled on Thursday.
Indigenous Indonesians bought a large supply of cooking oil after the Indonesian government set the price limit in February. The measure caused the cost of cooking oil to nearly triple when Jakarta lifted the ban in March.
“What happened was that cooking oil vendors didn't want to sell their oil at such a low price, so they started hoarding it,” Posman Sibuea, an instructor in Food technology in Santo Thomas Catholic University in Medan, told Al Jazeera on April 7.
“Actually, there are stocks of cooking oil all over the country, but we just don't know where they are,” Sibuea said. Sibuea further elaborated:
In Indonesia, the cooking oil factories typically don't produce the palm oil themselves, which means they need to purchase the oil by way of palm oil crude.
Producers are able sell their palm oil for whatever price they wish, and as the price of palm oil grew globally, it became increasingly difficult for manufacturers of cooking oil to purchase the raw material. This is among the major issues with the connection between palm oil plantations and processing of oil for cooking.
The lack of cooking oil was fatal in the middle of March within Indonesia's East Kalimantan province. Two women passed away just days after one another from apparent sunstroke as they tried to stand in long lines to receive their allotted amount of palm oil. The first one in Nusantara city (on March 14) and the other in Samarinda city (on March 15).
The Indonesian palm oil shortage is a mystery, given its position as the world's leading exporter and producer of the product. The issue is rooted in Jakarta's rule that only 20% of the production of palm oil in Indonesia is required to be used domestically.
Uli Arta Siagian is a forestry and plantation activist in an environmental non-profit named WALHI, which stands for The Indonesian Forum for Living Environment, described Indonesia's erratic oil crisis in an interview with Al Jazeera on April 7.
“The massive problem with palm oil is that the majority of oil palm plantations in Indonesia are owned by only a few people, maybe 20 at most,” Siagian disclosed. She continued, saying, “These people don't just own the plantations either, but also the entire industry infrastructure such as the factories and everything else. So they have a monopoly on the industry and a monopoly on the price of palm oil.”
The Indonesian government has in mid-March increased the export levy for palm oil. The levy was increased to “$375 per tonne as part of a plan to subsidize prices and distribute more than 200 million liters (6763 fluid ounces) of the product across the country each month,” Al Jazeera reported.
“On Tuesday [April 5], authorities announced the launch of a cash transfer scheme offering handouts of 300,000 Indonesian rupees ($20) to help lower-income citizens and restaurateurs purchase oil,” the Qatari news agency reported.