Economic Impact of Various

Changes of Government Policies

on Cooking Oil
Tauhid Ahmad & M. Rizal Taufiqurahman

Bali, November 3, 2022

INDEF
 Palm Oil dan Cooking Oil Consumption
Domestic Consumption of Palm Oil (Tons) Cooking Oil Consumption in Indonesia (per
Liter/Capita/Year)
20,000

18,000

16,000
7,342
14,000 5,960 7,233
12,000

10,000 1,056 5,693

2,126
1,695
8,000
1,448
6,000
9,860 8,954
4,000 8,428
6,158
2,000

-
2019 2020 2021 Aug-22

Food Biodiesel
Source : BPS, 2021 (processed)
Oleochemicals

Source : GAPKI, 2022 (processed)

Domestic consumption in the last four years averaged 36%
of total production. It is used for food 50.4%, oleochemical
9.6%, and biodiesel as well as 40%. The fastest growth for
the consumption of oleochemicals, such as used for soaps,
detergents, and so on.
Cooking oil which is part of food, the population's
consumption per capita/year continues to increase. the
average growth in the last 7 years is 2.3% per year. This
indicates that the domestic market is also growing along
with the development of the population.

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Indonesia National Cooking Oil Balance Prognosis
Items Jan-Nov Items Jan-Dec
2022 (ton) 2022 (ton)
Early Stock 2022 618.590 Early Stock 2022 618.590
Estimated Domestic 3.774.678 Estimated 6.067.350 In the national food balance,
Production Domestic consumption in 2022, which is estimated
Production
at 5.9 million tons of cooking oil, is likely
Total Avaibility 4.393.268 Total Avaibility 6.685.940 to be much lower. Considering that until
September, new consumption was 3.5
Requirement (Jan- 3.566.301 Requirement 5.969.376
Sept) (Annual) million tons of cooking oil. This decrease
is related to the volume of consumption
Requiremen 324.209 Requiremen 497.448 of cooking oil which has decreased due
t (Monthly) t (Monthly)
to a fairly high price increase since the
Balance 826.968 Balance 716.564 beginning of 2022.
Import Plan - Import Plan
Last Stock 2022 826.9268 826.927 716.564
Source : National Food Agency (2022)

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Cooking Oil Stock at Logistics Agency and Food SOEs

Currently, as an extension of the

478.226,98 government, food SOEs only have
Kl/Month 96 % minimal food stocks compared to the
497.448 monthly national needs, so they cannot
Kl/Month intervene to stabilize upstream-
19.221,02 downstream supply and prices.
Kl/Month 4 %
Bulog : 2.589,84
Kl/Month The private sector is far more dominant
ID Food : 706,08 in determining prices than the existence
Kl/Month of SOEs.
PTPN : 15.925,10
Kl/Month
Source : National Food Agency (2022)

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CPO Price Volatility & Policy

The decline in consumption KPB Nusantara, CPO, Delivered MDn/Dmi Jan 3, 2019-October 24, 2022
occurred due to the volatility of
world CPO prices. Considering 20000
that most of the world's oil
production is in Indonesia, the
18000
17651
16000
various policies also affect the 14000
world CPO price. As seen, the
12000 12420
highest volatility occurred in
10000
2022, much higher before the
pandemic.
8000
6599
6000 6750 6240
• Export Ban of Palm Oil, starting April 28, 4000
2022, to May 23, 2022 2000

• Domestic Market Obligation of 20 % and 0

Domestic Price Obligation, starting January
27, 2022, up to Now
• Starting July 12, 2022, CPO export levies has
Source : GAPKI, 2022
removed until the end of 2022.

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 CPO and Cooking Oil Price
CPO and Cooking Oil Price Distance CPO dan Cooking Oil Price (%)
60.0
30000

50.0
25000

40.0
20000

30.0
15000

20.0
10000

10.0
5000

0.0
0 3-Jan-22 3-Feb-22 3-Mar-22 3-Apr-22 3-May-22 3-Jun-22 3-Jul-22 3-Aug-22 3-
3-Jan-22 3-Feb-22 3-Mar-22 3-Apr-22 3-May-22 3-Jun-22 3-Jul-22 3-Aug-22 3-Sep-22 3-Oct-22 Sep-22 3-Oct-22

CPO KB (Rp/Kg) Bulk Cooking Oil (Rp/Kg) CPO to Bulk Cooking Oil (%) CPO to
Cooking Oil (Rp/Kg) Packaged Cooking Oil (Rp/Kg) Cooking Oil (% ) CPO to Packaged Cooking Oil (%)

Source : PIHPS, GAPKI, 2022 Source : PIHPS, GAPKI, 2022

The price distortion of CPO and cooking oil is getting bigger. It The distance between bulk cooking oil and packaged cooking
has implications for producers to compensate for the decline oil is getting higher. Although the price of CPO has increased
in bulk oil prices with an increase in packaged cooking oil relatively in the last two months, the price gap has become
prices. difficult for business actors to avoid.

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 The Impact on Macroeconomic Indicators
0.800

0.700
0.700

• In the short run, the impact of the

0.600
policy of changing cooking oil on
0.500
0.490 economic growth is minimal, 0.01
percent.
0.400 • Growth performance driven by an
increase in export performance by 0.49
%-change

0.300
percent, aggregate value added by
0.200 0.001 percent, and aggregate revenue
from imports by 0.70 percent.
0.100
• On the other hand, growth was also
0.010 0.001
0.000 suppressed by actual consumption,
Economic Growth Import
-0.040
Real Consumption Value Added
In-
Export Agregat Revenue
from Indirect Tax
investment, and imports which
-0.100
v0e.s0tm10e on Export decreased by -0.18 percent, -0.01
-0.200
nt
percent, and -0.04 percent,
-0.180
respectively.
-0.300
Macroeconomic Indicators

Source: CGE Model Result, 2022

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 The Impact on Output Performa by Sectors
0.030

0.021 0.020
0.020

0.010
0.010
• A change in cooking oil policy, in
0.000
0.000 general, will undoubtedly reduce
output productivity in various
-0.010 business sectors. Except in the
mining and quarrying,
-0.020
%-change

-0.020 construction, and corporate

-0.030 services sectors.
• This shows that policy changes in
-0.035
-0.040 -0.038
-0.040
the short term will erode the
-0.050 -0.046 -0.047
-0.043
-0.045 -0.045 amount of production in various
-0.050 -0.050 sectors, which will suppress the
-0.060 added value.
-0.060
-0.070
-0.070 -0.070
-0.080
Sectors

Source: CGE Model Result, 2022

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 The Impact on Prices by Sectors
0.100
0.066

0.050
• The impact of changes in cooking
oil policy in the short term also
0.000
0.000 depressed the prices of goods that
occurred in all sectors. Except for
-0.050 -0.035
the primary sector as a provider of
CPO raw materials processed into
-0.100 -0.085
%-change

-0.094 -0.096 cooking oil.

• This finding causes people's
-0.150
-0.140
-0.150 purchasing power to low because
-0.167
-0.200
there are no consumption drivers,
-0.188 -0.193
such as low-income taxes or rising
-0.210 -0.205
-0.250 -0.235
wages.
-0.247
-0.255

-0.300 -0.285

-0.320
-0.350
Sectors

Source: CGE Model Result, 2022

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 The Impact on Labor by Sectors

0.100
• Another impact of this
policy, in general, did not
0.050 0.040
stimulate an increase in
0.008
employment in various
0.002
0.000
0.000
sectors.
• This is because this policy is
short-term and does not
%-change

-0.050
-0.050
-0.040
-0.050 -0.055
automatically increase
-0.060
-0.073 -0.070 -0.068 wages caused by o sectoral
-0.100 -0.088 -0.083 -0.085 productivity also not
growing.
• However, there was an
-0.150 -0.135
-0.145 increase in the mining and
quarrying, construction, and
-0.180
-0.200 corporate services sectors.
Sectors

Source: CGE Model Result, 2022

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Policy Recommendations

• •The policies that occur have a small positive effect from the
macroeconomic side, but on the other hand, sectorally, have
a negative impact on various economic sectors.
• A relatively stable policy is needed to maintain consumption and
domestic prices for all needs, especially cooking oil.
• A buffer policy is needed, in particular, to keep CPO prices at a
relatively low level of volatility, especially in a period of global
uncertainty

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