Skip to content Skip to Search
Skip navigation

Indonesia’s cooking oil crisis explained

REUTERS/Willy Kurniawan
Indonesian palm oil farmers protest against the palm oil export ban, outside government offices in Jakarta on May 17

An export ban has infuriated farmers, amid soaring prices and claims that a ‘palm oil mafia’ is operating in the country

Indonesia, the world’s biggest exporter of palm oil, halted shipments on April 28 in a bid to flood the domestic market with supplies and control the soaring price of cooking oil.

The tough policy has rattled edible oil markets and cost hundreds of millions of dollars in lost revenue – but the price of cooking oil, a staple for Indonesian families, has not come down. Now the approval rating of President Joko Widodo is suffering too.

How are Indonesian authorities trying to rein in cooking oil prices?

The authorities in Jakarta have unrolled a bewildering array of measures over the past six months in an attempt to bring down prices, including subsidies, export permits and a palm oil levy as well as the export ban. So far, these have failed to reduce the cost of the household necessity, which is used by most people in the world’s fourth most populous country, to meet a government target.

What has happened to cooking oil prices?

Indonesian officials have pledged to remove the export ban once bulk cooking oil prices return to 14,000 rupiah ($0.95) a litre across the nation. The cooking oil price has slipped somewhat, but trade ministry data on Friday showed that cooking oil averaged 17,300 rupiah a litre. This is down from an average of 18,000 rupiah in April, but still well above the 13,300 rupiah reported in July 2021.

Indonesian minister blames a ‘palm oil mafia’

On March 18, Muhammad Lutfi, Indonesia’s trade minister, blamed a “palm oil mafia” for exploiting the situation. A month later, Sanitiar Burhanuddin, the attorney general, sent a chill through one of the country’s main export sectors by launching a corruption investigation over export permits. A trade ministry official and three palm oil executives have been arrested.

What is hindering cooking oil distribution?

Government efforts to bring down prices include getting state food procurement agency, Bulog, to distribute more cooking oil. But last week Bulog said a regulatory framework was not yet in place, meaning a plan to distribute subsidised cooking oil at the 14,000 rupiah price had not started.

Bulog said the regulations were needed to avoid any misstep in implementation and to ensure clarity on how costs would be covered.

Red tape undermining policies

Gulat Manurung, chairman of the smallholders group APKASINDO, blames government bureaucracy for stalling subsidy efforts.

The government is setting aside a subsidy to pay producers for any gap between production costs and selling prices.

But for palm refiners to be paid by Indonesia’s palm oil fund agency BPDPKS, a highly detailed list of distributors and retailers must be provided, subject to a state audit and with any errors potentially punishable by jail time.

“The factories have the cooking oil, but they are not selling to consumers,” said Gulat, who believes the system should be streamlined.

How do authorities say they are trying to improve distribution?

On Tuesday, the trade ministry unveiled a programme aimed at ensuring cheap cooking oil reaches low-income households in thousands of locations. The statement said retailers would be able to sell in bulk at 14,000 rupiah per litre to people who provide them with identity cards.

Asked about distribution, ministry official Merrijantij Punguan Pintaria said there were many components but logistics and transport limitations were key obstacles.

What will the endgame be?

“Jokowi”, as the president is popularly known, has said the need for affordable food trumped revenue concerns and the export ban would be lifted only after domestic needs were met. Palm oil traders have speculated the ban could be at least partially lifted soon, particularly with storage tanks filling up.

Politics is likely to play a key part in the timing. A survey this week by pollster Indikator Politik Indonesia showed the president’s approval rating is at a six-year low, largely tied to the rising cost of cooking oil and knock-on inflationary effects.

Latest articles

UAE president Sheikh Mohamed bin Zayed Al Nahyan and Egypt's president Abdel Fattah El-Sisi attend the signing ceremony of appointing Modon Holding as developer of Ras El Hekma

ADQ unveils plans for Ras El Hekma Egyptian project

Abu Dhabi sovereign wealth fund ADQ has revealed the plans for the Ras El Hekma mega development, which is expected to contribute $25 billion annually to Egypt’s GDP and create 750,000 jobs both directly and indirectly. The sovereign fund has appointed Abu Dhabi-listed Modon Holding as the master developer for the 170 million sq m […]

Advertisement, Person, Clothing

Almarai Q3 2024 profit rises 17% amid revenue growth

Almarai, the Middle East’s largest dairy farm, said third-quarter 2024 net profit rose 17 percent to SAR570 million ($152 million), compared with SAR486 million a year ago. The profit growth was driven by a 9 percent year-on-year increase in revenue to SAR5.2 billion amid growth in all product categories across all geographies, except Egypt. Despite […]

Clothing, Footwear, Shoe

PIF explores raising stakes in Japanese gaming companies 

Saudi Arabia’s Public Investment Fund is exploring increasing its stakes in Japanese gaming companies to develop the kingdom as a global centre for gaming. “There are always opportunities,” Prince Faisal bin Bandar Al Saud, vice chairman of Savvy Games Group told Kyodo News, a Japanese news agency. PIF now owns 8.6 percent of Nintendo, after […]

The ambitious plans to increase Abu Dhabi's GDP include investing in and encouraging non-oil sectors such as manufacturing, healthcare and bioscience

Abu Dhabi to announce new 2045 strategy for GDP growth

Abu Dhabi will soon launch a new economic strategy aimed at tripling its GDP by 2045, sources told AGBI. The strategy, expected to be released by the end of the year, outlines a broad transformation that seeks to further diversify the emirate’s economy, significantly reduce its reliance on oil, and position Abu Dhabi as a […]