Abstract
The increasing as non-food uses of vegetable oils especially as biodiesel and the basis of the oleo-chemical industry, making the formation of vegetable oil prices in world trade has been linked to world prices of crude oil in addition to linkages with the world price of vegetable oils competitor. The objectives of study were to analyze the linkage of the world price of crude and vegetable oil simultaneously, and examine the impact of the changes of the external factors and trade policy by the vegetable oil’s exporting countries and importing countries on the world trade of vegetable oils, and particularly the production, domestic supply, domestic consumption and exports volumes of Indonesian palm oil. The study employed an econometric model and parameters were estimated using Two Stage Least Squares methods for the period 1990-2017. The study found that real price projections in the world market of 2012-2025 periods show the price fluctuations of crude oil and vegetable oil tend to have same patterns with slightly trend to increases. Although positively correlated, the percentage increase of vegetable oils price as the effect of the increasing of crude oil price is less than the percentage change of crude oil prices, except for soybean oil prices that vista vies with the percentage change of crude oil prices. The effect on percentage change of price of soybean oils is the highest and then followed by palm oil. Beside the chemical characteristics, the condition related to the limited volumes of vegetable oils world’s productions and the food sector needs as a main constraints in the use of vegetable oils as crude oil substitutes. As annual crop commodities and the substitutes of seed oils, however, palm oil price has more responsive to export fluctuation then it. Keywords: price formation, world trade, vegetable oil, petroleum JEL Classifications: D43, F15, Q41, Q42 DOI: https://doi.org/10.32479/ijeep.7916
Highlights
Palm oil together with soybean oil and rapeseed oil are the three main oils produced and traded on the world market of vegetable oils and on the world market of edible oils and fats
The results showed that: (1) In the formation of world prices for each vegetable oil is relatively more responsive to changes in world imports than changes in world exports, (2) the response of world prices to the world’s largest export changes is owned by the world price of palm oil, followed by the world price of soybean oil and the world price of rapeseed oil, and (3) the response of world prices to changes in world imports is the largest owned by world prices of palm oil, followed by prices the world of soybean oil and world prices of rapeseed oil
Based on the explanation in the previous discussion, there are several conclusions such as the influence of world prices of petroleum and competitor vegetable oils on one type of vegetable oil transmitted through consumption which influences the trade balance on world markets
Summary
Palm oil together with soybean oil and rapeseed oil are the three main oils produced and traded on the world market of vegetable oils and on the world market of edible oils and fats. Production of vegetable oils is generally intended for food needs, while others are used for non-food purposes ( the oleo chemical and biodiesel industries) and the remainder is used as animal feed. In the trade of world vegetable oil in addition to competition between types of vegetable oil, the formation of the world price of vegetable oil is thought to have a relationship with world oil/crude oil prices. This link can be seen from the relatively similar pattern of vegetable oil price movements and oil prices, especially since 2003.
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