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Indonesians are paying the price for the cooking oil crisis

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About three weeks after Russian troops invaded Ukraine, Indonesian housewife Liesye Setiana was forced to shut down her banana chip business as supplies of cooking oil dried up across the country.

Millions of consumers and small business owners in the world’s fourth most populous country have been rocked for months by soaring cooking oil prices.

As the war between the two major grain and sunflower seed producers rocked global markets, many growers rushed to shift their goods overseas to take advantage of soaring rates.

Setiana was driving to a supermarket more than an hour from her remote village of Baruharjo in East Java to buy a daily eight-litre batch of palm oil that could sustain her business.

But the 49-year-old mother of two is said to be turned away as vendors heavily ration staples used in products ranging from cosmetics to chocolate spreads.

“I was fuming and told the employees that I really needed the cooking oil for personal use, not for hoarding,” said Setiana, who earned up to 750,000 rupees ($52) per day by selling his tasty yellow snack.

“How come we have cooking oil shortages when Indonesia is the world’s largest producer of palm oil?” »

Its battle for supplies is just a snapshot of the cooking oil crisis that has caused hour-long queues of locals with jerrycans in hand on the most populous island in the world. Indonesia, Java, and others like Borneo.

Two people died of exhaustion in March – including one who had queued at three different supermarkets, according to local media – as they waited in scorching heat to get their hands on a product that fetched 20,100 rupees a liter at its peak.

Count the costs

Indonesia produces around 60% of the world’s palm oil supply, a third of which is consumed domestically. India, China, the European Union (EU) and Pakistan are among its main export customers.

Pressure on home cooking oil forced the Indonesian government to impose a now-lifted ban on exports last month, driving down prices and boosting domestic supply.

But at the end of May, the price of the country’s most affordable bulk cooking oil was still hovering around 18,300 rupees per liter on average, above the government’s target of 14,000 rupees, the data showed. official.

The price spike has left many tough decisions to make.

Sutaryo, who like many Indonesians has only one name, runs a temple chip business from his home in South Jakarta. He was forced to raise his prices and lay off four employees to stay afloat.

“After the surge in cooking oil prices, we have to be smart in calculating our production costs. Our consumers have no choice but to accept a higher price for our kripik tempe,” said he said, referring to traditional soy. crackers.

With demand yet to pick up, production at the Sutaryo plant has dropped from 300 to 100 kilograms per day, and daily revenues have fallen to six million rupees from 15 million before the pandemic.

About half a dozen workers cut thin slices of the temple before tossing them into frying pans filled with hot oil, letting them sizzle until crispy.

It’s a far cry from the hustle and bustle of the company’s pre-pandemic peak, Sutaryo said, when he had employees frying temple chips outside for lack of space.

“Significant” impact on the poor

Cooking oil prices were already on the rise in 2021, but the impact of Moscow’s onslaught has pushed them to record highs, said Mohammad Faisal, executive director of the Center of Reform on Economics think tank ( CORE Indonesia).

The government is now moving to secure even more supplies in the country, which means the spike seen after Russia’s invasion of Ukraine is unlikely to happen again, he said. .

But while prices may drop in Indonesian cities, they will remain high for those living in rural and remote areas like Setiana.

“For low-income people, the impact is significant because, at the same time, there are price increases [of other commodities]“, Faisal said.

With local prices unlikely to fall and little money coming in since her husband was made redundant, Setiana now has other worries, such as not being able to pay school fees for her children.

“If commodity prices rise, we have little left over for other expenses.”