Indonesian Palm Oil export ban impact on food prices

Indonesia's palm oil ban

Indonesia is the world’s leading palm oil processor and exporter, followed by Malaysia, Thailand, Nigeria and Colombia. Palm oil is used as in countless products ranging from cosmetics to bakery products, and is notably used as a raw material in biodiesel plants. Indonesians use it as the traditional cooking oil and the industry employs a total of 17 million workers and hence plays a significant role in the economy. Large diversified companies such as Unilever and Nestle are major end users of Palm oil in a large variety of products. 

Impact of the war on oil markets

After the war in Ukraine disrupted international vegetable oil markets (Ukraine is the world's leading sunflower oil processor and exporter), leading to fast rising oil prices, the Indonesian government unexpectedly imposed a ban on crude oil and derivatives exports on April 28, 2022 and reversed it the following month, citing domestic market supply improvements in cooking oil. Palm oil has a sizeable share of the global vegetable oil market, and Indonesia alone accounts for 60% of the world's supply. The ban didn't appear to have reversed domestic price increases but reportedly led to a re-balancing of domestic supply and demand. The end of the ban is expected to allow for a fast resumption of exports and may lead to a softening of international oil prices. Many market observers, including economists had warned against such bans which tend to be repeated by other countries and exacerbate supply issues, leading to further price rises.

Keywords: palm oil ban, palm oil, cosmetics, bakery, raw material, vegetable oil, biodiesel plants, cooking oil, sunflower oil, crude oil, Unilever, Nestle, supply and demand, crude oil exports, price increases, Indonesia, Malysia, Thailand, Nigeria, Colombia