From Export Ban to Export Acceleration: Why Cooking Oil Price Interventions Were Ineffective
December 14, 2022
Mukhammad Faisol Amir, Muhammad Nidhal, Aditya Alta

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Abstract

Palm oil is the world’s most widely used vegetable cooking oil. Indonesia and Malaysia produce 57% and 27% of palm oil available in the global market, respectively. In addition to being a popular source of cooking oil, palm oil is also processed into biodiesel and used as an ingredient for processed foods, detergents, and cosmetics. In Indonesia, palm oil is used for food (48.59%), biodiesel (39.85%), and oleochemical (11.51%) with a total crude palm oil (CPO) and crude palm kernel oil (CPKO) production of 51.3 million tons in 2021, which is projected to increase to 51.8 million tonnes by the end of 2022 according to the Indonesian Palm Oil Association or GAPKI.

Though food use is still dominant, palm oil consumption for biodiesel shows an increasing trend throughout the years, growing at a rate of 26.40% in the last 5 years due to the government’s mandatory B30 policy. The policy stipulates that 30% palm-oil based fuel goes into its biodiesel to lower the country’s fuel imports and boost domestic production of palm oil. On the other hand, most palm oil derivatives (CPO, palm kernel oil (PKO), and their derivatives) produced in Indonesia are exported (65%), while only 35% are intended for domestic use. This situation creates tensions between alternative uses of palm oil, supplies for the global market, and domestic consumers.

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