After President Joko Widodo announced a halt to shipments of cooking oil and its raw material on Friday to control surging domestic costs, Indonesia will essentially restrict palm oil exports from April 28 until further notice.
Jokowi, as the president is called, said the policy sought to secure the availability of food supplies at home in a video broadcast.
“I will monitor and analyze the execution of this policy to ensure that cooking oil is abundant and affordable in the home market,” he said.
After Indonesia announced the embargo, U.S. soy oil futures rose more than 3% to a new high of 84.03 cents per pound.
According to Atul Chaturvedi, head of trade group the Solvent Extractors Association of India (SEA), the decision will harm consumers not only in India, the world’s largest importer but also globally, because palm oil is the world’s most consumed oil.
“This is a sad and completely unexpected decision,” he remarked.
Due to rising demand and weak output from top producers Indonesia and Malaysia, as well as a previous move by Indonesia to restrict palm oil exports in January that was later lifted in March, global prices of crude palm oil, which Indonesia uses for cooking oil, have soared to historic highs this year.
The average retail price of cooking oil in Indonesia is 26,436 rupiah ($1.84) per liter, up more than 40% year to date. According to a pricing monitoring website, prices have virtually doubled in various provinces across the country in the last month.
Students have demonstrated in numerous locations across Indonesia in recent days in protest of rising cooking oil prices.
The Indonesian government has set a price cap for bulk cooking oil at 14,000 rupiahs per liter, but data from the Trade Ministry shows that it was sold for more than 18,000 rupiahs this month.
A government inquiry into potential corruption in the issuance of sought-after export permits is underway.