Palm Oil: Like Looking After a Tiger Cub
We had not planned to write a long report about the rise in the price of cooking oil. This has already been extensively covered in online media and newspapers. As we are a weekly, it would be old news by the time the magazine was published. So, what is new?
An editorial meeting decided to make a report on the cooking oil issue after we heard from a source who told us that there was something amiss with the subsidies for this commodity. The government tried to reduce the price of cooking oil by increasing subsidies. The gap between the economic price and the maximum retail price was to be bridged using public funds raised from levies on palm oil exports. This is the same way the government provides subsidies for biodiesel, which are enjoyed by oil palm companies.
Armed with this information, we started to uncover the cooking oil commotion. How can it be that the world’s largest producer of palm oil fails to control the price of the cooking oil produced from it?
As usual, we met with a number of sources, carried out research and studied all the aspects. From these we found that the price of cooking oil changed in line with world palm oil prices. The price of cooking oil has not generated much discussion—unlike that of rice which often rises and causes a commotion—because the price of palm oil has been relatively stable, and has remained at a low level. When the price of palm oil soared out of control between the middle of 2020 and the end of 2021, everybody realized that there was something ‘amiss’ with our cooking oil market.
While we were gathering facts, for a number of reasons, we changed focus. From our initial desire to uncover the subsidy ‘games’, we moved on to find out why cooking oil prices rose, how the government responded, and other matters.
It turns out that palm oil is like a tiger cub. The government raised this tiger cub and offered it protection: it was fiercely defended, the biodiesel B30 program was created, and it was subsidized. However, these policies did not reduce the price of palm oil. It continued to rise. But when the price rose out of control, the government seems to have forgotten to apply the brakes.
The price of some cooking oil depends on palm oil. If palm oil prices rise, cooking oil follows. The government only realized this after the price of cooking oil had risen sharply, leading to public protests and eventually to complaints from the leadership. It was all because policies had been ignored by companies, who were making huge profits from the price of palm oil for export. The police also gave a warning about the use of palm oil export levies as a source of subsidies.
It was only after being buffeted all sides that the government implemented a key policy: regulating domestic palm oil prices and threatening companies with an export ban if they did not allocate supplies for domestic requirements. Was this policy effective? We examined the government’s chaotic efforts to reduce the price of cooking oil resulting from its being too generous to the palm oil barons.
Enjoy the magazine
Kairul Anam
Editor
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The Palm Oil Subsidy Boomerang
The government is powerless to suppress the rising cooking oil price. Three of their policies have failed to restrain it. Why has the price of cooking oil risen so much?
Ways to Reduce Prices
In order to suppress the price of cooking oil, the government has set a single-price policy and forced palm oil exporters to allocate a portion of exports for domestic requirements. Will the companies comply?
Interview with the Trade Minister
Muhammad Lutfi has drawn up policies that have changed almost every week because they failed to control the price of cooking oil. Why is he convinced that the latest measure will be effective?
COVER STORY FROM THE PREVIOUS WEEK
Deforestation Because of Nickel in Sulawesi
Sulawesi has 3 billion tons of nickel reserves. Companies are racing to extract it by reviving old permits using weak laws. Bribes and manipulation of nickel permits have destroyed Sulawesi’s forests.
The Green Industry Duel to the Death
Tycoon Boy Thohir—older brother of State-Owned Enterprises Minister Erick Thohir—has been put in charge of the green industrial park lighthouse project in north Kalimantan. Investment Minister Luhut Pandjaitan is behind it.
The Coal Bonanza
Companies are enjoying a coal bonanza on the international market as a result of the global gas crisis. They are ignoring their obligation to fulfill PLN’s requirement. The government banned coal exports, then revoked the ban. Why is it producing policies without any basis?
