Indonesia, the world's largest producer of palm oil, has launched a full embargo on its exports as of today, a measure that threatens to further destabilize the vegetable oil market.
The country of Southeast Asia has been facing shortages and rising prices of cooking oil in its internal market for many months and the authorities are worried that this will exacerbate the social unrest.
In a last-minute change last Wednesday night, Indonesian authorities clarified that the embargo applies to all oil exports, including crude and processed palm oil.
"The Commerce Department decree applies to all products, including crude palm oil," Economy Minister Erlanga Hartato said last night, explaining that the embargo would take effect between midnight Wednesday and Thursday.
Supplying the population is a top priority
Indonesian President Joko Widodo had stressed last night that the supply of the country's population is "the highest priority".
"As the largest producer of palm oil, it is ironic (Indonesia) that it is difficult to supply cooking oil," he said, while urging producers to work together.
Indonesia is facing supply problems, as producers prefer to send their stocks abroad to take advantage of rising prices.
Jakarta intends to resume exports when the price of cooking oil has fallen again to 14.000 rupees (97 cents) in the country, after rising by 70% in recent weeks.
Since the beginning of the year, there have been problems in Indonesia in the supply of palm oil, which is used as cooking oil in the country. Many Indonesians are forced to wait for hours in queues outside centers that distribute subsidized palm oil.
Used in cosmetics and food
Citizens' dissatisfaction with rising food prices has also helped reduce Widodo's popularity, according to recent opinion polls, and sparked protests in many cities.
60% of world palm oil production comes from Indonesia, with India, China, the EU and Pakistan being the main importers. Last year, the country exported 34,2 million tonnes of palm oil.
Palm oil is a key ingredient in many products, including cosmetics and food.
The prices of edible oils already reached historically high prices in March due to insufficient global supply due to the Russian invasion of Ukraine, as both countries are major exporters of sunflower oil.
Source: RES - EIA