Nobody can compensate for the loss of Indonesian palm oil
In late April 2022, Indonesia — the world's largest palm oil producer — halted all exports to protect its own citizens from rising food costs, a decision made in Jakarta that would be felt in kitchens across Asia and Africa. The move, already layered atop the supply wounds inflicted by the war in Ukraine, left importing nations like India, Pakistan, and Bangladesh with few alternatives and little time. It is a reminder of how deeply the food security of billions can rest on the policy choices of one government, and how quickly a domestic political calculation becomes a shared human burden.
- Indonesia's total export ban on palm oil — announced without a clear end date — removed nearly half of India's edible oil supply from the market overnight.
- With sunflower and soybean oil already scarce due to the Ukraine war, India's refiners had been walking a tightrope; this ban snapped the last wire of flexibility.
- Malaysia, the only plausible alternative supplier, lacks the production capacity to fill the gap, leaving importers across Asia and Africa with nowhere to turn.
- Edible oils had already driven 60 percent of India's food inflation despite representing less than 8 percent of the inflation basket — the ban threatens to push that pressure far higher.
- The shock will travel well beyond cooking oil, raising costs for soaps, shampoos, packaged foods, and restaurant meals — hitting cost-sensitive households at every point of daily life.
On a Thursday in late April, Indonesia shut its palm oil export pipeline entirely. President Joko Widodo's government called it necessary medicine — domestic food prices were climbing, and with political rivals gaining ground, keeping Indonesians fed affordably was both policy and survival. But what was framed as an internal fix immediately became an external crisis.
India imports roughly half its palm oil from Indonesia. Pakistan and Bangladesh rely on the country for close to 80 percent of their supplies. Experts were quick to note that Malaysia, the world's second-largest producer, simply could not absorb the shortfall. The gap would remain a gap.
For India, the timing was punishing. The war in Ukraine had already halved imports of sunflower and soybean oil, and refiners had been quietly managing by shifting between varieties. That flexibility was now exhausted. Edible oils had already accounted for 60 percent of India's food and beverage inflation in the prior fiscal year — a striking figure given they represent less than 8 percent of the inflation basket. Wholesale inflation in the category had reached 14.55 percent by March 2022, and the trajectory pointed only upward.
The consequences would not stop at the kitchen. Palm oil flows into soap, shampoo, packaged goods, and restaurant supply chains. Every price increase at the commodity level travels downstream to consumers who are already absorbing higher fuel and food costs. Across Asia and Africa, the weekly shopping bill was about to get heavier.
India's alternatives were narrow. No other producer operates at Indonesia's scale. The ban was declared temporary — "till further notice" — but with no timeline offered, markets and households alike were left to absorb an open-ended uncertainty, one born in Jakarta and felt by billions who had no part in making it.
On a Thursday in late April, Indonesia closed its doors to palm oil exports. The world's largest producer of the commodity—a country that supplies nearly half of what India needs each year—had decided to stop shipping altogether, at least for now. President Joko Widodo's government framed the move as necessary medicine for a domestic crisis: inflation was climbing, food prices were rising, and he wanted to guarantee that Indonesians could afford to eat. The political math was simple enough. Widodo's rivals were gaining ground in popularity contests, and controlling prices at home seemed like a way to shore up his standing.
But Indonesia's problem was about to become everyone else's problem. India imports roughly half its palm oil from Indonesia. Pakistan and Bangladesh depend on the country for about 80 percent of their supplies. When Indonesia had been exporting, it was charging $575 per tonne in duties. Now there would be no exports at all, and no duties to collect—because there would be nothing to sell.
The immediate question was whether other producers could step in. Malaysia, the world's second-largest palm oil maker, seemed like the obvious alternative. But experts were already shaking their heads. Rasheed JanMohd, who chairs Pakistan's Edible Oil Refiners Association, put it bluntly: nobody could make up for what Indonesia was taking off the market. Every country that depended on palm oil was going to hurt.
For India, the timing could hardly have been worse. Edible oil prices were already at record highs. The war in Ukraine had squeezed supplies of sunflower and soybean oil—imports had been cut in half—and refiners had been managing the shortage by shifting to other varieties. But there was only so much flexibility in the system. An official at one of India's major oil refineries described what was coming as a "devastating effect" unless the situation resolved quickly. The math was stark: oil and fats had already driven 60 percent of food and beverage inflation in India during the previous fiscal year, even though they made up only 7.8 percent of the inflation basket. Wholesale prices for edible oils had been climbing since late 2019 and showed no sign of stopping. By March 2022, wholesale inflation in the category had hit 14.55 percent.
The squeeze would ripple far beyond the dinner table. Palm oil is a raw material for everything from soap to shampoo. Hotels, restaurants, and food manufacturers all depend on it. When the price of palm oil goes up, the cost of making those products goes up too. Consumers in Asia and Africa—already straining under higher fuel costs and food prices—would feel the weight of Indonesia's decision in their weekly shopping bills and in the price of basic goods they could not avoid buying.
India's options were limited. It could try to buy more from Malaysia, but Malaysia simply did not have enough to offer. The country could look to other suppliers, but none of them produced at the scale Indonesia did. What had seemed like a domestic policy choice in Jakarta was now a supply shock rippling across a region of billions of people, many of them living paycheck to paycheck. The ban had been announced as a temporary measure—"till further notice"—but no one knew when it might end, or what the price of edible oil would look like in the meantime.
Citas Notables
Nobody can compensate for the loss of Indonesian palm oil. Every country is going to suffer.— Rasheed JanMohd, chairman of Pakistan Edible Oil Refiners Association
The Indonesian oil ban will have a devastating effect unless sorted out quickly.— An edible oil refiner official
La Conversación del Hearth Otra perspectiva de la historia
Why did Indonesia decide to ban exports now, of all times? It seems like they're making their own problem worse.
They were trying to solve a different problem—their own inflation. Widodo's political position was weakening, and food prices at home were rising. He needed to show voters he could control costs. The export ban was meant to keep more palm oil in Indonesia, which should theoretically lower domestic prices.
But that doesn't work if the world price goes up because of the shortage, does it?
Exactly. Indonesia can keep prices low at home by restricting exports, but it creates a global shortage. And when global prices spike, it affects every country that imports from them—which is most of the world.
So India gets caught in the middle.
India gets caught in the middle. They were already dealing with record-high edible oil prices because of the Ukraine war. Now their main supplier just shut the door. Malaysia could theoretically help, but Malaysia doesn't produce enough to replace Indonesia.
What happens to ordinary Indian consumers?
They pay more for cooking oil, yes, but also for soap, shampoo, any product made with palm oil. And this hits the poorest hardest—people who spend most of their income on food and essentials.
Is there any way out of this?
Only if Indonesia lifts the ban, or if global prices fall enough that other suppliers become competitive. But neither seems likely in the near term.