Far from Ukraine, Indonesia’s poor can’t get cooking oil | business and economy

Medan, Indonesia – Every day at her roadside stand in Medan, North Sumatra, Siti Rohani frys hundreds of traditional Indonesian snacks, including three types of donuts, fried tempeh and tofu, banana fritters, spring rolls and curry puffs.

All that frying means Rouhani uses a lot of cooking oil — up to five liters (169 fl oz) a day.

The only problem for Rouhani is that cooking oil is becoming increasingly difficult to obtain given the chronic shortages across the archipelago.

In February, the Indonesian government capped the price of a liter of oil at 14,000 Indonesian rupees ($0.93) after rising prices for crude palm oil pushed cooking oil prices up by more than 50 percent. Also, to limit shortages, authorities began restricting customers to 2 liters (68 fl oz) of oil per purchase.

“I had to go from one place to another across the city to buy another liter or two of oil or to find out that the next place was completely sold out,” Rouhani told Al Jazeera. “It just made everything harder.”

According to Posman Sibuea, a lecturer in food technology at the Catholic University of Santo Thomas in Medan, the price cap that has since been lifted has another undesirable side effect.

“What happened was that cooking oil sellers didn’t want to sell their oil at such a low price, so they started hoarding it,” he told Al Jazeera. “Actually, there are stocks of cooking oil all over the country, but we just don’t know where they are.”

In recent months, the price of crude palm oil has risen by as much as 40 percent due to a combination of factors including the Russian invasion of Ukraine, which supplies most of Europe’s sunflower oil. With Ukraine’s supply of sunflower oil cut off by the conflict, demand for other oils, such as palm oil, has surged.

The COVID-19 pandemic has also impacted crops in palm oil-producing countries like neighboring Malaysia, as migrants who normally work the plantations have been locked out of the country.

Indonesia is the world’s largest producer and exporter of palm oil, and production in the country far exceeds domestic demand. However, government regulations only require that 20 percent of production remain domestic, so the rest can be exported abroad.

The question also arises as to who actually owns the Indonesian oil palms.

palm fruit
Palm oil prices have risen by up to 40 percent since the beginning of the year [File: Supri /Reuters]

“The massive problem with palm oil is that the majority of palm oil plantations in Indonesia are owned by just a few people, maybe 20 at most,” Uli Arta Siagian, forest and plantation activist at environmental non-profit organization WALHI, told Al Jazeera.

“These people not only own the plantations, but also all the industrial infrastructure like the factories and everything else. So they have a monopoly on the industry and a monopoly on the price of palm oil.”

According to data from the Indonesian Bureau of Statistics (BPS), Indonesia produced 44.8 million tons of crude palm oil in 2020, 60 percent of which was produced by private companies and 34 percent by individual farmers.

The remaining 6 percent was produced by state-owned companies.

That year, Indonesia exported more than $18 billion worth of palm oil, according to BPS data.

“In Indonesia, edible oil factories don’t usually produce their own palm oil, so they have to buy it from palm oil producers in the form of crude palm oil,” Sibuea said.

“Producers can sell the palm oil at any price they want, and as palm oil prices rose around the world, it became more difficult for cooking oil factories to buy the crude product. That is one of the core problems, this connection between the palm oil plantations and the cooking oil factories.”

In mid-March, the Indonesian government decided to more than double the maximum export levy on palm oil exports to $375 per tonne in order to subsidize prices and distribute more than 200 million liters (6763 fluid ounces) of the product across the country each month.

On Tuesday, authorities announced the launch of a cash transfer program that will distribute 300,000 Indonesian rupees ($20) to help low-income citizens and restaurant owners buy oil.

Rouhani said she had heard about the plan but was unsure of the details.

“Of course I want to apply if I meet the criteria,” she said.

Sign in Indonesian store restricting the purchase of cooking oil
Indonesia has limited cooking oil purchases to two liters per person [Courtesy of Aisyah Llewellyn]

Amid the shortages, some enterprising Indonesians have also taken to buying up as much cooking oil as they can and selling it on the black market at grossly inflated prices to desperate buyers. In East Kalimantan, a province in Indonesia’s Borneo, two women died after queuing for hours in the hot sun to grab the meager supplies of cooking oil available at local convenience stores.

Some Indonesians have questioned why the country is so dependent on cooking oil, most notably former Indonesian President Megawati Soekarnoputri.

“The problem is not that cooking oil is expensive. I’ve stopped thinking, do women fry their food every day? To the point that they fight over cooking oil?” said Soekarnoputri last month during an event about childhood stunting.

“Is there no way to boil or steam or make rujak? [Indonesia fruit salad]? These are Indonesian dishes. Why are people complicating this?”

To prove their point, Seokarnoputri’s party, the Indonesian Struggle Democratic Party, held a cooking demonstration in Jakarta a few days later, with chefs preparing boiled, stewed and grilled dishes while footage of the former president offering cooking and dietary advice played in the background.

Siagian, the environmental activist, said she agrees that Indonesia has become too dependent on cooking oil.

“When we’re so dependent on just one product, we’re very vulnerable, and issuing cash isn’t going to solve a complex problem in an economic sector dominated by private companies,” she said.

“We need action”

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