% contribution to global exports of palm oil by country

Global palm oil prices will not ease quickly due to domestic supply requirements for Indonesian palm oil exporters

Restrictive policies by the Indonesian government suggest that elevated global prices of palm oil will persist through Q3 2022. Since it is used as an input in a wide variety of daily consumer products such as chocolate, shampoo, and cosmetics, B2C firms that manufacture non-durable goods should expect elevated input costs in the coming months. High prices of palm oil will feed into inflation levels in importing countries, with low- and middle-income consumers being more severely impacted. Firms should expect pricing pressures to be more acute in India, Pakistan, and China since they are the largest importers of Indonesian palm oil.


The war in Ukraine created a global shortage of sunflower oil, resulting in a surge in demand for its closest substitute, palm oil. Indonesia plays a major role in fulfilling this demand since it accounts for over half of the global supply. The government placed a temporary export ban on April 28 to keep domestic inflation under control. The Indonesian government lifted the ban on May 23 but replaced it with a domestic market obligation (DMO) for Indonesian palm oil exporters. As per the DMO, companies must provide 30% of their supply to the local market. Only companies that can meet the DMO will be granted an export permit.

Our View

Indonesia’s palm oil export policy has had the desired effect on domestic inflation which has remained under control. However, global prices—which have risen sharply after the war—will remain elevated in Q3 due to uncertainty surrounding Indonesia’s palm oil export policy and Malaysia’s (second-largest producer) palm oil export tax. These pricing pressures will ease towards the end of Q3 as Indonesia will slowly open up its supply over the next couple of months after stabilizing domestic prices. Loosening restrictions by the Indonesian government and increasing supply by Malaysia will help to fill the global supply gap of palm oil.

At FrontierView, our mission is to help our clients grow and win in their most important markets. We are excited to share that FiscalNote, a leading technology provider of global policy and market intelligence has acquired FrontierView. We will continue to cover issues and topics driving growth in your business, while fully leveraging FiscalNote’s portfolio within the global risk, ESG, and geopolitical advisory product suite.

Subscribe to our weekly newsletter The Lens published by our Global Economics and Scenarios team which highlights high-impact developments and trends for business professionals. For full access to our offerings, start your free trial today and download our complimentary mobile app, available on iOS and Android.