By Bernadette Christina

JAKARTA (Reuters – Indonesian cooking oil prices rose in November. Officials were under pressure to lower the costs of the essential household product made from palm oils and that is what most Indonesians use.

However, the rapid-fire policies of government, which included twice stopping palm oil exports, left a trail of confusion that sometimes both shocked and confused global edible oil markets.

According to government sources, President Joko Woldodo shows that he’s willing to work hard to extract more Indonesia’s wealth resources. However, some of the U-turns triggered by frustration with stubbornly high cooking oils prices caught senior officials unaware.

The president’s focus was highlighted by his statement that the pressing need to eat affordable food outweighed revenue worries in the largest palm oil producer in the world.

Kevin O’Rourke, political risk analyst at Political Risk said: “Widodo is genuinely obsessed with attempts to support social welfare via regulatory measures. Which has sometimes entailed mistakes.”

In November, initial efforts were made to lower prices. The government declared that an industry group would be offering 11 million litres cooking oil for 14,000 rupees ($0.9669) per bottle.

However, subsidies were introduced by the government to purchase more than one billion litres worth of cooking oil.

Export permits came in January. At first, they required 20% of the sales of certain products on the domestic market. This was later raised to 30%. There was also a limit to how much cooking oil could be sold.

However, even with these measures, the cooking oil began to disappear from retail stores, leading to long lines in shops.

‘PALM OIL MAFIA’

Airlangga Hartarto (Coordinating Minister of Economics) changed course and in March increased subsidies.

Trade Minister Muhammad Lutfi, however, removed the March 18 export bans and increased the palm-oil export levy. He blamed a “palm mafia”, who exploited the situation.

After the incident, grocery stores were able to purchase cooking oil but their prices soared up to 25,000 Rupiah per Liter.

Since then, the attorney general launched an investigation into corruption in relation to palm oil export permits.

Students protested across the archipelago about rising food prices and the high cost of oil, expressing concern to the public.

THREAT FROM HEADING

Two government sources, who requested anonymity, claimed that the president, commonly known as Jokowi has become increasingly angry following months of unsuccessful attempts to reduce prices.

Jokowi announced this month cash transfers to more than 20,000,000 low-income households for cooking oil. On April 22, Jokowi also declared an export ban, sending Malaysian palm oils futures to their highest levels in six weeks.

Airlangga said that ban only would apply to the shipment of RBD palm oil. This helped calm markets.

Airlangga changed her mind, saying that bans would be applied to all crude palm oil, palm oil refined, and cooking oils.

When asked to comment on policy confusion, both the presidential palace (and the state secretary office) did not immediately reply to our requests.

But indicating opaque policy-making, some government officials said they were unaware the ban had been widened prior to Airlangga’s public announcement.Moreover, a letter sent by the agriculture ministry to provincial governors this week and reviewed by Reuters had specified the ban would only be for RBD palm olein.

Global edible oil markets have been shaken by the policy shifts. They have also experienced shockwaves after the loss of large amounts of their supply from the conflict in Ukraine.

Officials from Indonesia have promised to lift the ban on exports once bulk cooking oils prices reach 14,000 Rupiah per litre. However, some fear that hoarding could undermine the policy if prices continue to rise.

Analyst O’Rourke stated that if hoarding is a problem, the ban could prove ineffective or counterproductive.

($1 = 14,480.0000 rupiah)