Indonesia’s lift on palm-oil export ban brings relief to the global vegetable oil market

INDONESIA—Indonesia has lifted its three-week-long palm oil export ban due to improvements in its domestic cooking oil supply.

The move has been received with great joy by commodity markets globally as it is expected to bring relief to the global market after the war in Ukraine, labour restrictions, and climate change tightened the supply of vegetable oil, pushing up prices. 

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When the price of vegetable oils rose steeply, the Indonesian government scrambled to find effective domestic measures to protect consumers.

It initially decreed a price cap on palm oil and imposed a limit of two liters per customer and later increased the levy on palm oil exports and offered direct cash transfers to low-income citizens to subsidize purchases of the staple food. None of their strategies resolved the issue.

The small group of businesses that control the country’s palm oil sector began allocating more and more of their oil to the export market, thus creating a bottleneck in the domestic supply chain.

A wave of protests arose, prompting the Indonesian government to enact the ban to ensure domestic supply and stabilize domestic prices. Although the export ban temporarily quelled domestic outcry, the rest of the world was rattled.

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Palm oil is crucial for producing everything from food products to shampoo to biodiesel. With Indonesia accounting for about 60 percent of the global supply, the ban saw prices leaping by more than 200% in the global market.

Industry groups warned that the palm oil sector could come to a standstill in the coming weeks, and farming groups demonstrated against the export ban, which had hit their incomes at a time of rising global prices. This led the government to review its decision.

“Based on the current supply and price of cooking oil and considering that there are 17 million workers in the palm oil industry, both working farmers and other supporting staff, I have decided that the export of cooking oil will reopen on Monday, May 23,” AP news agency reported Indonesia’s president, Joko Widodo saying.

The president added that he expects prices for domestic consumers to reduce further even as exports resume and that the government would monitor prices and act to keep more palm oil in the country if necessary.

To ensure supply security, Economy Minister Airlangga Hartarto said the government will impose a Domestic Market Obligation (DMO) on palm oil producers to ensure 10 million tons of cooking oil remains at home.

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