Palm Oil In The World Vegetable Oil Revolution

The World’s Top Four vegetable oils are palm oil, soybean oil, sunflower oil and rapeseed oil. They are four of the 17 types of vegetable oils in the world. In 1965 the world vegetable oil market was dominated by soybean oil with a share of 65 percent. Then followed by European vegetable oils, namely rapeseed oil and sunflower oil. The dominance position of soybean oil is still going on until 2006.

Since 2006, Indonesia has succeeded in seizing an important position in the world economy by becoming the world’s largest producer of palm oil and at the same time becoming the world’s largest producer of vegetable oil. Two titles were conquered by Indonesia namely as the “king” of world palm oil (defeating Malaysia) and the “king” of world vegetable oil defeating United States soybean oil. For the first time in the history of the world economy, products from Indonesia brought revolution to the world vegetable oil market.

In 2016, the share of palm oil in the (main) world vegetable oil market reached 40 percent, leaving soybean oil whose share declined to only 33 percent. Now the world’s consumption of vegetable oil is dominated by palm oil and the world’s largest producer of palm oil is Indonesia with a 54 percent share. This is a world vegetable oil revolution, which Byerlee (2017) of Stanford University calls the tropical vegetable oil revolution.

The displacement of soybean oil is not due to decreased soybean oil production or reduced soybean plantation area. In contrast, soybean plantations rose sharply from 25.8 million hectares in 1965 to 123 million hectares in 2016. While world oil palm plantations only rose from 3.6 million hectares to 20.2 million hectares in the same period. However, palm oil productivity is 8-10 times that of soybean oil.

The superiority of oil productivity from these oil palm plantations makes palm oil prices also much cheaper than the prices of soybean oil and European vegetable oils. In addition, the characteristics of oil palm plantations in the form of productive trees produce oil until the age of 25-30 years, making the supply of palm oil much more stable and less influential (compared to other vegetable oils) due to climate change.

The world vegetable oil market revolution (production and consumption) marked by the emergence of palm oil as the world’s main vegetable oil (replacing soybean oil), and also spreads to the world downstream vegetable oil market. As is known, vegetable oil is used for food (oleofood), oleochemicals (soaps, detergents, toiletries, cosmetics, etc) and biodiesel.

At present, almost 60 percent of the world’s processed food uses palm oil. Likewise, the oleochemical products have also shifted to using palm oil. Even the use of palm oil in the world biodiesel as its raw material is increasing in portion.

In the future, the world vegetable oil market revolution including its downstream product market will continue even stronger. Palm oil production from the “king” of world palm oil namely Indonesia is still increasing going forward mainly due to increased productivity. Moreover, downstream technology is also increasingly developing, so that the palm oil user industry is increasingly expanding in the future. Bioavtur, biopremium, bioplastic, and biolubricants from palm oil will soon be present on the world market which will also participate in the world vegetable oil market revolution.

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