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Indonesia, World Largest Palm Oil Producer Lacking Stock

cooking oil

The story of the scarcity of cooking oil in Indonesia has become the spotlight of national and international media, noting that Indonesia is the world’s largest palm oil (CPO) producing country.

The Economist highlighted people in Central Java to East Kalimantan who had to queue to buy cheap palm cooking oil.

In East Kalimantan, on the island of Borneo, which produces nearly two-fifths of Indonesia’s palm oil, at least two housewives died while waiting in line,” explained The Economist as quoted on Monday 4th April 2022. 

Last February, the Indonesian government set the highest retail price (HET) for cooking oil at Rp14,000 per litre for packaged oil and Rp11,500 for bulk oil. Overnight, shelves in various markets and retailers were empty in various parts of the country. 

Empty palm cooking oil discloses most Indonesians’ access because imported vegetable oil is an unaffordable luxury. Moreover, when the packaged cooking oil HET was removed, the packaged cooking oil miraculously reappeared with tripling prices. 

Indonesian Ombudsman member Yeka Hendra Fatika blamed the increase in cooking oil prices on several factors, including the Russia-Ukraine war and the COVID-19 pandemic. As of February 2022, the price of crude palm oil (CPO) soared by 40 percent compared to the previous year.

The government in January imposed a 20 percent domestic market obligation (DMO) for all producers, which is expected to push down retail prices. However, it only lasted a month, after suppliers vehemently refused, the government removed DMO, in favour of imposing higher export levies on CPO.

Cooking oil under the initial DMO scheme was sold at a fixed price, which producers said made it difficult to cover production costs. 

The big difference between CPO and DMO prices is what causes panic buying and hoarding,” Fatika explained.

Meanwhile, Arie Rompas from Greenpeace Indonesia believes that the government should pursue industrial oligarchs who often stockpile supplies. In 2019, Indonesia produced 47.1 million tons of CPO, of which 76 percent was exported.

Eddy Hartono from the Indonesian Palm Oil Association (GAPKI) said the initial 20 percent DMO should have exceeded local demand. Therefore, he suspects oil is “lost” along the distribution chain.

In mid-March, the government discovered millions of tons of cooking oil hoarded by conglomerates. The District Attorney’s Office in Jakarta, which is investigating the scarcity of cooking oil, said they were investigating the role of the cartel.

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