As if there weren’t enough problems right now, the world is facing the threat of an oil embargo.
No, not black gold — red gold, better known as palm oil. Prices gyrated this week after Indonesia, which produces about two-thirds of the global crop, promised to halt exports of the deep-orange edible fat to calm domestic food prices in the run-up to the Eid al-Fitr public holiday. Panic subsided a little on Tuesday after clarification that the ban wouldn’t apply to the crude palm oil that’s a benchmark for the global price of vegetable fats. Still, the world should take the episode as a taste of things to come, as the growth of biofuels increasingly conflicts with the need to feed the world’s poorest.
Palm plantations are to Southeast Asia what cornfields are to the US Midwest. Like corn, palm fruit can produce a mixture of human food, animal feed and transport fuels. It can also be used to make soap and other personal products, currently the biggest source of demand after food. That’s very well when all end-use sectors are in balance — but when one becomes too dominant, it’s often food prices that are squeezed higher, sparking inflation, protests and government intervention.