As the festival of lights, Diwali, approaches, the prices of edible oil are likely to surge. The sudden increase in the price is linked to geopolitical tensions, OPEC country’s oil production restrictions, and Indonesia’s decision to curb the export of palm oil.
The India Ratings and Research report said that Indonesia’s decision to export the ban on crude palm oil will affect both supply and prices of edible oils globally. The aforementioned reasons will remove 2 million tonnes of palm oil supply from the global market every month.
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This is roughly equivalent to 50 per cent of the monthly global trade volumes. Hence, this will increase the demand for substitutes in the global market. Last week, The All India Edible Oil Traders Federation reported an increase in palm oil by Rs 10-12 per litre, soya bean oil by Rs 14-Rs16, and sunflower oil prices by Rs 18- Rs 20 per litre in the retail stores. The price increase has upped consumer inflation and placed the palm oil supply under a cloud.
The ongoing Russia-Ukraine conflict has severely impacted the availability of crude sunflower oil. Since both countries account for over two-thirds of global production. In March, the price of the oil rose to USD 1,900 per tonne. Meanwhile, South America is grappling with a drought-leading shadow on soya bean production.
India imports 70 per cent of its oil hence the country is volatile to any change in the global oil market. Shankar Thakkar, National President of AIEOTF and General Secretary of the Confederation of All India Traders (CAIT), said, “The announcement of a reduction in the production of petroleum crude by OPEC countries and depreciation of the rupee against the dollar led to a sudden increase in the prices of edible oil."
The India Ratings and Research report cites that continued levels of depreciation of the Indian currency will affect the landed prices of other edible oils as well. This will result in overall double-digit growth in the prices of oil during the festive season.