Authorities in Indonesia have suspended export of palm oil as the world's largest supplier of the oilseed struggles to meet its own demand.

Indonesia's oil shortage has been exacerbated by reluctance among producers to sell at home due to high international prices.
Indonesia's oil shortage has been exacerbated by reluctance among producers to sell at home due to high international prices. (AFP)

Indonesia begun imposing a complete ban on palm oil exports, as the world's largest producer of the commodity risked destabilising a global vegetable oil market already hitting peak prices.

Authorities in Southeast Asia's most populous country fear the scarcity and rising costs could provoke social tensions and have imposed the ban on Thursday in a move to secure supplies of the product, which is used in a range of goods such as chocolate spreads and cosmetics.

The archipelago nation is facing a domestic shortage of cooking oil as well as soaring prices, with consumers in several cities having to queue for hours in front of distribution centres to buy the essential commodity at subsidised rates.

In a last-minute reversal late on Wednesday, they clarified the embargo would include all exports of the oilseed and not only products intended for edible oils, as indicated a day earlier.

"All products," including crude palm oil, "are covered by the Ministry of Trade regulation and will be enforced," said Coordinating Minister for Economic Affairs Airlangga Hartarto.

President Joko Widodo said supplying the country's 270 million residents was his government's "highest priority".

"As the world's largest palm oil producer, it is ironic that we are having difficulties getting cooking oil," he said.

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Spillover effect

Indonesia produces about 60 percent of the world's palm oil, with one-third consumed by its domestic market.

India, China, the European Union and Pakistan are among its major export customers.

The months-long shortage has been exacerbated by poor regulation and reluctance among producers to sell at home due to high international prices that have made exports more profitable.

Jakarta plans to resume exports when the price of bulk cooking oil in local markets has fallen to 97 cents (14,000 rupiah) per litre, having rocketed 70 percent in recent weeks to $1.80 (26,000 rupiah).

Vegetable oils are among a number of staple food items that have seen prices hit record highs in recent weeks, following Russia's offensive in agricultural powerhouse Ukraine, according to the United Nations Food and Agriculture Organisation.

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Source: AFP