Managing Cooking Oil

The price of palm oil-based cooking oil is again soaring amid the government’s attempt to fulfill its basic supplies. The causes of the price rise need to be overcome.

KOMPAS/TOTOK WIJAYANTO

A distribution agent worker loads jerry cans filled with bulk cooking oil into a truck in the Tanah Abang area, Jakarta, Tuesday (7/11/2023). The government rolled out a number of policies to maintain stability in the supply and price of cooking oil.

A cooking oil price hike occurred at the end of 2021 up to the first quarter of 2022. The government promptly restricted the export of crude palm oil (CPO) and several derivatives for their diversion to supply the domestic cooking oil industry.

The other policy was the supply of subsidized cooking oil with the brand Minyakita. The retail price ceiling (HET) was fixed at Rp 14,000 per liter. In January and early February 2023, the price of Minyakita was higher than the HET. In several markets it was unavailable.

The average retail price of premium cooking oil is Rp 20,000 per liter.

Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan said the cooking oil price increase, including that of Minyakita, was caused by the shift of cooking oil consumption from premium quality oil to subsidized cooking oil. The other cause was the declining supply of cooking oil raw materials to meet domestic needs as the domestic market obligation (DMO) was fulfilled by exporters. The DMO supply has decreased over the last two months as world palm oil demand is dwindling, while the government has applied the formula of six portions of export to be compensated for by one portion of DMO (Kompas, 7/2/2023).

The government’s explanation about the consumption shift from premium to subsidized cooking oil should be examined because it can serve as an indication of the weakening purchasing power of society. The average retail price of premium cooking oil is Rp 20,000 per liter.

REGINA RUKMORINI

Packaged cooking oil of various brands has a price tag above IDR 14,000 per liter, at a kiosk in Rejowinagun Market, Magelang City, (21/1/2022).

The domestic demand for subsidized cooking oil is expected to increase as the month of Ramadan and Idul Fitri are nearing. We can predict this demand and prepare CPO stocks to prevent the price from fluctuating.

Maintaining the cooking oil price at an affordable level is important. Palm oil-based cooking oil is a cheap source of fat for the greater part of the population and fat is needed in the body’s process of metabolism. Keeping the cooking oil price stable is also important to handle inflation that affects the public’s purchasing power.

The government can assist by facilitating business licensing and certification of farmers’ palm oil products.

The cooking oil price fluctuation should be under control if state-owned palm oil companies produce cooking oil in large quantities. Sadly, the present role of state-owned enterprises (SOEs) does not yet concretely influence the price of cooking oil. Our cooking oil mostly comes from large private companies that are export-oriented.

For the future, also in the management of palm oil products without forest denudation, it will be appropriate if oil palm farmers are included in the production of cooking oil. They can serve household needs in villages and small towns that are a long way from distribution routes. The government can assist by facilitating business licensing and certification of farmers’ palm oil products. In this way, farmers will no longer have to be easy prey when the price of palm oil is fluctuating.

This article was translated by Aris Prawira.