Malaysia looks to meet global palm oil demand after Indonesia's export ban,

 but labour shortage an issue

Malaysia is the world's second-largest producer of palm oil after Indonesia.

25 Apr 2022

KUALA LUMPUR: The global demand for palm oil is likely to switch to Malaysia after Indonesia's export ban, but industry players warned that labour shortage could hamper output.

Plantation Industries and Commodities Minister Zuraida Kamaruddin told the media on Sunday (Apr 24) that Malaysia should be able to increase its production of palm oil with the reopening of the country’s borders.

“I am confident that Malaysia is ready and able to supply palm oil to global markets because our production is expected to rise following the reopening of its borders, which has enabled the hiring of foreign workers,” Mdm Zuraida was quoted as saying by Bernama.

In an announcement last Friday, Indonesian President Joko Widodo said the exports of cooking oil and crude palm oil (CPO) would be suspended starting this Thursday in a bid to stabilise prices in the country.

“The government prohibits the exports of palm oil used in cooking oil,” said Mr Widodo, who is also popularly known as Jokowi.

In recent months, cooking oil prices have soared in Indonesia amid an increase in global CPO prices, prompting the government to implement price ceilings and export restrictions.

In a separate event on Sunday, Deputy Plantation Industries and Commodities Minister Wee Jeck Seng said the local palm oil production is currently being affected by the ongoing labour shortage issue, and therefore it is unlikely that Malaysia will be able to fulfil the high export demand gap left by Indonesia.

“This imbalance in demand and supply would see prices of palm oil and other competing oils soaring," he was quoted as saying by Bernama.

Related:


As global palm oil prices rise, cooking oil stock runs low in Indonesia’s retail outlets

Indonesian farmers support palm oil export ban

Dr Wee said as of last year, Indonesia's palm oil accounted for 59 per cent and 56 per cent of the world’s palm oil production and exports respectively, adding that Indonesian palm oil exports represented 30 per cent of total world oils and fats exports.

“As such, this drastic step taken by Indonesia will definitely have a massive impact on other countries, especially major palm oil importers such as China, India and the European Union,” he said after attending his constituency’s Muslim breaking of fast event.

The deputy minister added that the Malaysian government’s move to set price control and a ceiling price for palm cooking oil could also help protect the consumers from the effects of surging palm oil prices in the global market.

However, Dr Wee said that this also means that the government will have to bear the higher cost of cooking oil subsidies due to the increase in palm oil prices in the market to ensure that the welfare and interests of Malaysian consumers are protected.

ADVANTAGE TO MALAYSIAN PALM OIL INDUSTRY

Meanwhile, the Malaysian Palm Oil Association (MPOA) said the Indonesian export ban is likely to be an advantage to the Malaysian palm oil industry.

The Star quoted MPOA chief executive officer Nageeb Wahab as saying that he envisaged the local palm oil industry would be able to reap higher export earnings this year, particularly in the next two to three months.

Related:

Malaysia's palm oil board urges countries to reconsider food versus fuel priorities

Malaysian Palm Oil Board (MPOB) director-general Ahmad Parveez Ghulam Kadir said that “any policy changes by Indonesia will definitely affect Malaysia” as the latter is the second-largest producer and exporter of palm oil after Indonesia.

“The ban will definitely see most of the global palm oil demand switching to Malaysia,” he said, as quoted by the Star.

However, he also noted that Malaysia is facing an issue with palm oil supply due to the severe labour shortage and the country may not be able to absorb much of the excess global demand.

Indonesia's palm oil export ban leaves global buyers with no plan B

 People shop for cooking oil made using palm oil at a supermarket in Jakarta

Sun, April 24, 2022
By Rajendra Jadhav

MUMBAI (Reuters) - Global edible oil consumers have no option but to pay top dollar for supplies after Indonesia's surprise palm oil export ban forced buyers to seek alternatives, already in short supply due to adverse weather and Russia's invasion of Ukraine.

The move by the world's biggest palm oil producer to ban exports from Thursday will lift prices of all major edible oils including palm oil, soyoil, sunflower oil and rapeseed oil, industry watchers predict. That will place extra strain on cost-sensitive consumers in Asia and Africa hit by higher fuel and food prices.

"Indonesia's decision affects not only palm oil availability, but vegetable oils worldwide," James Fry, chairman of commodities consultancy LMC International, told Reuters.

Palm oil - used in everything from cakes and frying fats to cosmetics and cleaning products - accounts for nearly 60% of global vegetable oil shipments, and top producer Indonesia accounts for around a third of all vegetable oil exports. It announced the export ban on April 22, until further notice, in a move to tackle rising domestic prices.

"This is happening when the export tonnages of all other major oils are under pressure: soybean oil due to droughts in South America; rapeseed oil due to disastrous canola crops in Canada; and sunflower oil because of Russia's war on Ukraine," Fry said.

Vegetable oil prices have already risen more than 50% in the past six months as factors from labour shortages in Malaysia to droughts in Argentina and Canada - the biggest exporters of soyoil and canola oil respectively - curtailed supplies.

GRAPHIC-Global edible oil prices scale record highs after every major oil suffers supply setbacks https://fingfx.thomsonreuters.com/gfx/ce/gdpzyawzovw/GlobalVegOilsApril2022.png

Buyers were hoping a bumper sunflower crop from top exporter Ukraine would ease the tightness, but supplies from Kyiv have stopped because of what Russia calls its "special operation" in the country.

This had prompted importers to bank on palm oil being able to plug the supply gap until Indonesia's shock ban delivered a "double whammy" to buyers, said Atul Chaturvedi, president of trade body the Solvent Extractors Association of India (SEA).

NO ALTERNATIVE

Importers such as India, Bangladesh and Pakistan will try to increase palm oil purchases from Malaysia, but the world's second-biggest palm oil producer cannot fill the gap created by Indonesia, Chaturvedi said.

Indonesia typically supplies nearly half of India's total palm oil imports, while Pakistan and Bangladesh import nearly 80% of their palm oil from Indonesia.

"Nobody can compensate for the loss of Indonesian palm oil. Every country is going to suffer," said Rasheed JanMohd, chairman of Pakistan Edible oil Refiners Association (PEORA).

GRAPHIC-Key global edible oil statistics 

https://fingfx.thomsonreuters.com/gfx/ce/qmypmeaeopr/EdibleOilStats.png

In February, prices of vegetable oils jumped to a record high as sunflower oil supplies were disrupted from the Black Sea region.

The price rise raised working capital requirements for oil refiners, who were holding lower inventories than normal in anticipation of a pullback in prices, said a Mumbai-based dealer with a global trading firm.

Instead, all oil prices have rallied further.

"Refiners have been caught on the wrong foot. Now they can't afford to wait for a few weeks. They have to make purchases to run plants," the dealer said.

As Indonesia has allowed loading until April 28, consuming countries will have enough supply for the first half of May, but could face shortages from the second half, said a refiner based in Dhaka.

South Asian refiners will only slowly release oil into the market as they know supplies are limited, he said.

In India, the world's biggest vegetable oil importer, palm oil prices rose by nearly 5% over the weekend as industry prices in shortages in the coming months. Prices also rose in Pakistan and Bangladesh.

(Reporting by Rajendra Jadhav; Editing by Gavin Maguire and Kenneth Maxwell)

Indonesia, the world's top cooking-oil exporter, says it's going to ban exports of the oil this week, and it's sent the global prices of edible oils soaring

Huileng Tan
Sun, April 24, 2022


Indonesia, a top palm-oil exporter, is planning to ban exports beginning on Thursday.


Palm oil, the world's most used vegetable oil, is used in cooking and a range of consumer products.


Palm-oil and competing soybean-oil prices are jumping after news of the ban.

The world's top palm-oil producer announced that it would ban exports of the commodity starting on Thursday, sending the prices of edible oils soaring.

Indonesia accounts for about half of the world's supply of palm oil, the world's most widely used vegetable oil. Palm oil is used for cooking and for the production of thousands of consumer products, including biscuits, detergents, and lipsticks.

In a video statement on Friday, Indonesian President Joko Widodo said the move was designed to bring down domestic palm-oil prices and ensure domestic food availability in the wake of global food inflation.

"I will monitor and evaluate the implementation of this policy so availability of cooking oil in the domestic market becomes abundant and affordable," Widodo said, a Reuters translation reported.

The move comes as Indonesia has seen recent protests over the high prices of cooking oil, with retail prices gaining more than 40% so far this year, Reuters reported.

The ban is expected to be in place until further notice. Indonesian palm-oil exports were worth about $30 billion in 2021, the data provider Statista showed.

Sri Mulyani Indrawati, Indonesia's finance minister, told Reuters on Friday that the palm-oil ban would hurt other countries, but that it was necessary to contain the soaring domestic prices of cooking oil.

Benchmark crude palm-oil futures on the Bursa Malaysia exchange jumped as much as 7% on Monday morning. They are up over 40% year to date.

Prices for alternative vegetable oil also spiked in response to the impending ban on palm-oil exports in Indonesia. Benchmark Chicago soybean oil prices hit their highest levels since 2008, Reuters reported.

Prices of edible oil — including palm oil — have been rising because of the war in Ukraine, as the country is a large sunflower-oil exporter. "Edible oils are often interchangeable, so a shortage of one type exerts pressure on the others," Gro Intelligence, a global agriculture data-analysis firm, wrote in an April 23 note.

Gains in vegetable-oil prices are outpacing overall food-price increases, Gro Intelligence wrote in the report. US prices of a basket of common vegetable oils are up 41% on year, while food prices are up 25% on year.

"Indonesia's ban on exports is likely to further fuel global food inflation," the firm added.

https://news.yahoo.com/malaysia-urges-countries-prioritise-food-050134644.html#:~:text=Malaysia%20urges%20countries,Kapoor%2C%20Martin%20Petty)

Understanding Peak Oil: What It Is And Why It Matters

By Michael Kern - Aug 29, 2024

• Peak oil and peak oil demand are two separate phenomena with different implications for our society and economy.
• 
  
• It is important to understand the complex factors driving peak oil, from geopolitics to technology.
• 
  
• We need to prepare ourselves for a sustainable future based on renewable energy sources by navigating the uncertainty of peak oil demand and production.
• 
  

Are we running out of oil? 

This question has been on the minds of many experts in recent years.

The world consumes a staggering 100 million barrels of oil every single day. This dependence on fossil fuels has powered our modern society, but recent events like the war in Ukraine and the resulting energy crisis have underscored our vulnerability to disruptions in the global oil supply.

But what does this mean for our future? Will we have to give up our cars and switch to bicycles? Or will new technologies save us from a world without oil? 

Understanding the concept of "peak oil " is crucial in navigating this uncertain energy landscape.

In this article, we'll dive deep into the topic of peak oil and explore its causes, implications, and potential solutions. 

What Is Peak Oil

Peak oil refers to the point in time when global petroleum production reaches its maximum point and subsequently begins an irreversible decline. This occurs when readily accessible oil reserves are depleted, forcing us to rely on more challenging and expensive extraction methods.

The concept was first introduced by M. King Hubbert in the 1950s. His theory proposed that oil production would follow a bell-shaped curve, with a peak representing the point at which half of the total recoverable reserves had been extracted. This prediction has been largely accurate, as we have witnessed a steady increase in global oil production followed by signs of plateauing and even decline in recent years.

The implications of peak oil are far-reaching. As we deplete the most accessible oil reserves, extracting remaining resources becomes increasingly challenging and expensive. This leads to higher production costs, which are eventually passed on to consumers in the form of higher prices for gasoline, diesel fuel, and other petroleum-based products. Additionally, the transition to less accessible reserves can disrupt supply chains and geopolitical stability, further exacerbating the challenges associated with peak oil.

What Will Cause Peak Oil?

The inevitability of peak oil is driven by a confluence of factors:

• Geological Constraints: One of the primary reasons for peak oil is geological constraints. Most of the world's easily accessible oil reserves have already been discovered and exploited, meaning that oil companies must turn to more difficult-to-reach reserves, such as deepwater offshore drilling or unconventional sources like shale oil. These reserves are often more expensive to extract and produce smaller yields than traditional wells. As a result, the cost of producing each barrel of oil increases over time.
• Geopolitical Instability: Geopolitical instability can also play a role in peak oil. Many of the world's largest oil-producing regions are located in politically unstable areas where conflict and unrest can disrupt production and supply chains. For example, wars in Iraq and Syria have led to significant disruptions in global petroleum production in recent years. And Venezuela’s ongoing economic crisis has absolutely crushed its ability to produce oil.
• Technological Limitations: Despite advancements in drilling technology, there are limits to how much oil can be extracted from a given reserve. Environmental concerns also restrict new drilling sites and expansions, making it more challenging to increase production.
• Rising Demand: The growing energy needs of developing economies, particularly China and India, put additional strain on the global oil supply. As these countries continue to industrialize and urbanize, their demand for oil is expected to rise, further accelerating the depletion of reserves.
• Environmental Pressures: The increasing awareness of climate change and the associated environmental impacts of fossil fuel consumption have led to growing pressure to reduce reliance on oil. This includes efforts to transition to renewable energy sources and to implement policies that limit the use of fossil fuels.

The consequences of this decline could be catastrophic if we do not take action now to transition away from fossil fuels towards renewable energy sources or invest heavily in carbon capture technologies designed to mitigate their impact on the environment.

Peak Oil Is Not The Same As Peak Oil Demand

One common misconception about peak oil is that it is the same as peak oil demandhttps://oilprice.com/Energy/Crude-Oil/How-Close-Are-We-To-Peak-Oil-Demand.html. While both concepts are related to the future of global petroleum production, they represent different phenomena.

Peak oil refers to the point at which global petroleum production reaches its maximum point and begins to decline. This means that we will have extracted all of the easily accessible and cost-effective reserves, and will need to turn to more expensive and difficult-to-reach sources to meet our energy needs. The consequences of peak oil could be significant, including higher prices for gasoline, diesel fuel, and other petroleum-based products.

On the other hand, peak oil demand refers to the point at which global demand for petroleum products begins to decline. 

This could happen for a variety of reasons, including: 

• Increased adoption of electric or hydrogen vehicles
• Increased availability of consistent renewable energy
• Rising oil prices 
• Environmental concerns

While these two concepts are related in that they both relate to the future of global energy production and consumption, they represent fundamentally different phenomena with distinct implications for our society and economy.

It's worth noting that while peak oil demand may not necessarily coincide with peak oil production, there is some evidence suggesting that it may be coming sooner than previously thought. 

For example, several countries have announced plans to phase out gasoline-powered cars within the next few decades in favor of electric vehicles.

Additionally, advances in lithium battery technology, alternative battery technology and renewable energy could make it increasingly cost-effective for individuals and businesses alike to switch away from fossil fuels.

What's Next? Navigating a Post-Peak Oil World

As global oil production eventually declines, several scenarios could unfold:

• Complete Transition to Renewables: A shift towards solar, wind, and other renewable energy sources to meet all our energy needs.
• Reduced Fossil Fuel Use with Carbon Capture: Continued but diminished fossil fuel use, coupled with technologies to mitigate their environmental impact.
• New Technologies: Development of innovative extraction methods or synthetic alternatives to access previously inaccessible reserves.

Regardless of the path we take, proactive measures are necessary to avoid a chaotic transition.

One thing is certain: our reliance on fossil fuels cannot continue indefinitely. By investing in new technologies now, we can help ensure a smooth transition away from petroleum-based products over time.

Peak oil represents a major challenge for humanity as we seek ways to meet our growing energy needs. 

At least for now, we’re dependent on oil. And while no one knows exactly when or how this process will unfold, one thing is clear: change is coming whether we're ready for it or not.

Peak Oil Frequently Asked Questions

Will peak oil ever happen?

Yes, peak oil is highly likely to happen. It is a matter of when, not if. While new discoveries and technological advancements can extend the timeline, geological limitations and increasing demand will eventually lead to a decline in global oil production.

When was peak oil in the US?

The United States experienced its first peak oil in conventional oil production in 1970, reaching around 9.6 million barrels per day. However, with the advent of fracking and other technological advancements, the U.S. has seen a resurgence in production, reaching a new peak of approximately 13 million barrels per day in 2019. It's worth noting that this new peak is primarily driven by unconventional sources like shale oil, which are more expensive and environmentally impactful to extract. Experts predict a decline in U.S. oil production in the coming years as shale oil wells deplete faster than conventional ones.

How many years of oil is left in the world?

Estimates vary, but based on current proven reserves and consumption rates, we have roughly 50 years of oil left at current production levels. However, this is a dynamic figure influenced by new discoveries, technological developments, and changes in demand. As we transition to cleaner energy sources, oil consumption might decrease, extending the timeline.

How does peak oil affect humans?

Peak oil has the potential to cause significant disruptions to human society, including:

• Economic Impacts: Rising energy prices and supply disruptions can lead to increased transportation costs, higher food prices, and economic recession, particularly affecting industries heavily reliant on oil.
• Social and Political Unrest: Economic hardship and energy insecurity can trigger social unrest and political instability.
• Geopolitical Conflicts: Competition for dwindling oil resources can exacerbate existing geopolitical tensions and even lead to new conflicts.
• Environmental Impacts: Increased reliance on unconventional oil sources can lead to heightened environmental damage due to more intensive extraction processes.

It is crucial to proactively mitigate these potential impacts through a multifaceted approach, encompassing investments in renewable energy, energy efficiency measures, and sustainable transportation solutions.

 

By Michael Kern for Oilprice.com 

‘The green transition is a myth’: Adam Hanieh on the ongoing centrality of oil to capitalism

By Adam Hanieh & James Wilt

Published 15 April, 2025

[Editor’s note: Marxist scholar Adam Hanieh will be speaking at Ecosocialism 2025, September 5-7, Naarm/Melbourne, Australia. For more information on the conference visit ecosocialism.org.au.]

First published at Canadian Dimension.

Many vital left-wing books about global oil politics have been published over the last 15 or so years: Mazen Labban’s Space, Oil and Capital, Timothy Mitchell’s Carbon Democracy, Matt Huber’s Lifeblood, and Simon Pirani’s Burning Up. Perhaps none have provided quite as sweeping and synthetic of an analysis as Adam Hanieh’s Crude Capitalism: Oil, Corporate Power, and the Making of the World Market, published by Verso in September.

In Crude Capitalism, Hanieh — a professor of political economy and global development at the University of Exeter’s Institute of Arab and Islamic Studies — offers a highly readable overview of the oil industry, stretching from the late-1800s to the present day, stopping along the way for deep dives into topics ranging from the Soviet Union’s fossil economy, the rise of OPEC, and the failed promise of so-called “low-carbon solutions.”

Of particular usefulness is the book’s emphasis on petrochemicals and national oil companies, including their intertwined relationship in the Middle East and East Asia, especially China. Hanieh argues that this dynamic helps account for the United States’ ongoing support for Israel, with power over Middle Eastern oil producers used as a key lever to rebuff China’s rising global influence.

James Wilt spoke with Hanieh.

Many Canadian Dimension readers are familiar with the oil shock of 1973, where OPEC producers asserted greater control over the pricing and production of oil. Arguably far less known, but equally important, is the subsequent oil glut and the “counter-shock” of the 1980s. Can you explain this period of oil price stagnation and freefall, and how it set the stage for the rebounding of the industry in the 2000s?

This is an important period to understand better and is often overlooked in the current discussions on oil and fossil fuels more broadly. The place to start here is the world market and its dynamics at the end of the 1970s and early 1980s, following the end of the post-war economic boom. This was a moment of major economic slump and the reorganization of the world economy, and this was deeply connected to what went on with oil at that time.

One part of this was the “Volcker shock,” a pivotal moment in 1980 when Paul Volcker, then chair of the Federal Reserve, raised US interest rates to more than 20 percent. He did this in order to create a recession with the goal of halting US inflation and strengthening the US dollar vis-à-vis other currencies. It triggered a global recession between 1980 and 1982, which was the deepest recession since the Second World War. In turn, this meant a contraction in economic activity, and therefore a huge drop in consumption of oil. So there was about a 10 percent drop in oil consumption between 1979 and 1983. It is not widely recognized that this was actually the largest drop in oil demand in history. It was even more than during the COVID pandemic.

The second dynamic alongside this global recession was an increasing diversity in the geographies of oil production. New oil reserves had come online in the 1970s and early 1980s, notably in the North Sea and in Mexico, and the Soviet Union was still producing significant amounts of oil. So concurrent with the global recession, we also have increased availability of supplies of oil outside of the traditional OPEC countries. This is non-OPEC supply.

As these two trends developed, there was a really important structural shift in the global oil industry related to the way that oil was priced. Up until the early 1980s, oil prices had been set in what is described as a system of “administrative pricing.” For the first part of the 20th century, up until OPEC, it was the big Western oil supermajors who set the price of oil. These firms were called the “Seven Sisters” — the predecessors of today’s ExxonMobil, Shell, BP, Chevron and other big oil firms. They controlled oil from the moment of extraction, through refining, on to the petrol pump, with most of the world’s oil moving within their vertically integrated structures. And then after the establishment of OPEC, the big oil producers — Saudi Arabia, Venezuela, Iran — gained much more influence over the price of oil. This is what is meant by administrative pricing — the ones who controlled crude supplies set the price at which oil was sold.

But during the early 1980s, OPEC’s ability to control the price of oil had begun to slip. Partly because there were new oil supplies entering the market such as those from Mexico and UK in the North Sea. There were also new oil traders entering the picture. These were private commodity trading companies that bought oil from producer countries and then sold it on what are called spot markets, which are financial markets where short-term contracts and cash prices could be negotiated for oil between buyers and sellers, often for one-off transactions, rather than the long-term contracts that had previously been in place with the big OPEC producers.

So we’re talking about three concurrent shifts. One is the global economic slump, the crisis of world capitalism in the early 1980s. Secondly, more supply of oil coming online and an increased diversity of producers. And thirdly, this emergence of new actors buying and selling oil.

There are two principal consequences of these trends that would be useful to highlight. First is the counter-shock itself, the big drop in the price of oil that took place between 1985 and 1986 when the price of oil dropped by about 50 percent. This impacted all oil producers, but had a particularly severe impact on the Soviet Union, which was reliant on oil sales to earn foreign currency. The collapse in the price of oil played a significant part in the crisis of the Soviet political economy through the late 1980s, culminating in the USSR’s eventual breakup in 1991.

The second consequence of this counter-shock was that it really marked the breakdown of the longstanding system of administrative oil pricing. And in its place emerged a market-based system of oil pricing, in which oil futures traded on financial markets set the price of oil. This is what we have today, and it is substantially autonomous—although not separate from—the physical production and consumption of oil. The link between oil and financial markets played a big part in the emergence of what is often described as “financialization.” I think it’s a problem that so much of the discussion about oil takes place without acknowledging these changes to oil pricing mechanisms—as if the 1980s never happened and we are still living in the 1960s.

One of the more effective pieces of oil industry propaganda that we’ve seen emerge in the last while is that, beyond a fuel for transportation, petroleum products are in countless things that we use on a daily basis: plastics, synthetic fibres, and so much more. For the most part, it seems that this line has largely been disregarded by the left. In contrast, your work argues that it’s vital that we understand the material uniqueness and significance of petrochemicals, and how plastics are being posed as the future of the oil industry. Why do you think this aspect of oil consumption has often been underappreciated, and why is it important to come to grips with?

One of the key arguments in the book is that we need to break with a kind of commodity fetishism when we think about oil. What I mean by this is that we need to situate oil and oil’s meaning, if you like, in the various logics of capitalism — not as something inherent to oil itself. If we take this approach, we can see oil beyond its role as simply a liquid transport fuel, and trace how it has become so embedded throughout a huge array of our daily lives. Finance is one side to this, but the petrochemical/plastics industry is another.

This transition to a synthetic world began in the mid-20th century. And it meant that natural products like wood, glass, natural rubber and fertilizers, and so forth, were systematically displaced by products of petroleum: plastics, synthetic fibers, synthetic fertilizers, and other kinds of petroleum-based chemicals. I spend some time in the book explaining what this did for capitalism, including enabling a huge expansion in the quantity and diversity of commodities that could be produced and consumed, cheapening manufacturing and reducing labour costs, and speeding up the turnover time of capital’s circulation. Of course, it also came with disastrous ecological consequences.

This moment was fundamental to oil’s emergence as the world’s principal fossil fuel, because it enabled oil to become the material substrate to basically all of the commodities that surround us. Once you stop and pause for a minute and just look around the room and think about where all these plastics, rubbers, and paints come from, you see how ubiquitous oil (and increasingly fossil gas) really is. It has woven fossil fuels into our daily lives, but in an unseen way. It not only made the oil industry so much more powerful — in the sense that this commodity becomes integrated into everything we consume and depend upon — but it has also made oil invisible. It’s a paradox: oil is everywhere but we can’t see it.

I think this is really crucial for the left to address because it takes the discussion both about oil and where oil’s apparent power comes from in a different direction. And it also helps us think about the problem of plastics in a different way. The dominant narrative about plastics is that the problem is one of toxic waste and the need to improve recycling. Obviously plastic waste is a hugely important issue, but the problem is actually much bigger than that when we place the emergence of petrochemicals in the bigger picture of what they do for capitalism. It also helps explain why the demand for petrochemicals and plastics is growing so rapidly. The estimate is that there’s going to be a tripling in the consumption of plastics by 2060.

One of the most striking examples here is the advent of fast fashion — the rapid turnover of clothing styles involving many micro-seasons of styles, and a huge increase in the quantity of clothes that are produced. Now, one side of this is of course the highly exploited workers in factories located across the Global South producing clothes on demand for the multinational clothing companies. But it was synthetic fibres — petrochemical products like polyester — that enabled this huge increase in clothing production from the 1980s onwards. The ever present tendency for capitalism to increase the quantity of commodities produced — in this case clothing — was made possible through oil and the petrochemical commodity.

Today, oil companies describe petrochemicals and plastics literally as the future of oil. And there is also an increasing recognition that plastics themselves are a major source of greenhouse gasses. If plastics were a country, the emissions associated with their production would rank them as the world’s fifth-largest greenhouse gas emitter. So we need to think about plastics in the sense of how they have embedded the power of oil in our lives, and are thus a central question to tackling the climate crisis.

An important point you make is that historical and contemporary “energy transitions” have consistently been a process of addition, not replacement. What are a few past examples of this, and how might this understanding help us make sense of so-called low-carbon technologies like carbon capture and storage and hydrogen power?

I think there are many flaws in the way that energy transitions are typically thought about. The generally accepted notion is that capitalism is transitioning away from fossil fuels with renewables and various kinds of green technologies. We might quibble about how fast that is happening, but the assumption is that oil, gas, and fossil fuels are on their way out.

But if you look historically, energy transitions under capitalism have always been additive. The so-called coal to oil transition that happened in the middle of the 20th century is a good example. Coal, back in the early 20th century, was about 85 percent of the world’s primary energy. Now it’s much, much less: it’s about 25 percent. But if you look at the total quantity of coal that’s being consumed, we’re producing more coal than ever before. The same is true with natural gas. Natural gas only really became an important energy source in the 1980s and 1990s. Now it is significant and substantial, particularly in electricity production. But it doesn’t mean that oil or coal have declined in terms of their absolute production and consumption.

The reason for this is another feature of capitalism: the tendency to increase energy throughput, to draw in new forms of energy production and increase the total quantity of energy consumed and thus the quantities of commodities produced. The problem is that so much of the climate debate is framed in relative terms, and not in absolute terms. What matters is the absolute production of fossil fuels, not their relative share.

It’s exceedingly rare to see a global drop in energy consumption. It happened in the early 1980s with the global recession I’ve just spoken about. It happened in 1973 with the global recession associated with the oil shock. It happened in 2008, and it happened with COVID. But there has only been four times in the last six decades that we have seen a sustained drop in the global consumption of oil.

So when we look at renewables: it’s clear that, yes, there is going to be an increase in renewable sources, particularly for electricity. There may even be a drop in the relative share of fossil fuels for things like electricity production. But I think it’s unlikely that under capitalism we will see any genuine transition from fossil fuels. In this sense, the green transition is a myth. It’s not happening — and certainly not at the pace necessary to mitigate the worst case scenarios of the climate disaster.

The question of AI and the huge energy demands that are required for this sector confirm this point absolutely. Some of the predictions around the increased electricity and water needed to run data centers are mind boggling. And an increasing share may come from solar and wind (and nuclear). But this makes it even more unlikely to envision a shift away from fossil fuels.

The other kinds of technologies you mention such as hydrogen and carbon capture — these kinds of so-called low carbon solutions — raise a whole set of different problems, which I talk about in the book at length. But in short, I think really these are false or chimeric kind of solutions that are being pushed by oil companies, basically because they allow for ever increasing oil and gas production. In that sense, they’re even more dangerous than some of the illusions around renewables supplanting fossil fuels.

Another major argument in the book concerns the formation of an “East-East hydrocarbon axis” between the Middle East and Asia, which — in contrast to North America and West Europe — involves massive national oil companies and largely conventional oil resources. This aspect is another piece that seems to have been overlooked, with understandable emphasis on the private Western supermajors and consumption. Briefly, when did this East-East hydrocarbon axis start to take form, and how should it shape our understandings of the global industry?

Again, we need to start with situating oil as a crucial commodity within global capitalism and the major shift that’s taken place over the last few decades of much of global manufacturing towards China and wider East Asia. This shift in global production, much of it destined for markets in North America and Western Europe, was associated with a massive increase in the demand for oil coming from East Asia.

The share of China’s consumption of oil globally is about 14 percent of the world’s oil today, which has tripled since the early 1990s. So China now is second only to the United States in terms of global oil consumption. And this is the main reason why the world’s consumption of oil is about 40 percent higher today than it was in 1995. China has big oil supplies domestically but not enough to meet this demand. And so it had to be met by imports. The primary place where those imports came from and continue to come from were the Gulf states of the Middle East: Saudi Arabia, the United Arab Emirates, and the other monarchies of the Gulf.

Today, something like one-third of all oil consumed globally is in East Asia, and most of this is supplied through imports. China’s share of world oil imports now exceeds 20 percent. So that’s one-fifth of the world’s oil imports going just to China. And about 70 percent of all crude oil exports from the Middle East go to Asia. That’s what I mean by this East-East hydrocarbon circuit.

But it’s not just crude oil that’s important to this story. Coming back to the question of petrochemicals, we also see refined products moving from the Middle East to China and East Asia. And we see cross-border investments from big oil companies in the Gulf, and oil companies and petrochemical companies in China, moving back and forth between the two regions: joint ownership structures in major Chinese petrochemical firms that are now owned by Saudi or part owned by Saudi firms and so forth. We can see the same kind of patterns in wider East Asia, particularly South Korea and Japan.

It’s essential to put this in the global picture. The US and Canada are major oil producers — the US is the biggest oil producer in the world. But most of this North American oil circulates within North America. The Gulf’s oil production goes eastward now.

One thing this has done is really strengthened the big majority state-owned or national oil companies that are based in the Middle East. The standout company here is Saudi Aramco, the Saudi state-owned firm, which is by far the largest oil company in the world. Its profits last year were about $121 billion. If you add up the profits of ExxonMobil, Chevron, TotalEnergies, Shell, and BP, Aramco’s profits exceed all of them combined. So it’s a massive company. And it’s no longer simply a crude oil producer. It’s also one of the biggest petrochemical firms in the world now. It’s a major refiner of oil. It’s a major shipper. It owns fertilizer production sites. So all down the value chain, Aramco and the other big Gulf producers are present. They’re following the same pattern that the Western supermajors followed in the early- and mid-20th century of downstream integration. All of this is not to say that the Western companies are not important. They’re absolutely crucial. It’s instead a call to see the diversity of the actors in the global oil industry today.

How can we make sense of the role of oil in global militarism, while also accounting for major recent shifts in oil production, with Canada making up a larger share of US oil consumption, replacing OPEC imports?

There are a lot of simplistic narratives about oil, American imperialism, and the Middle East. The idea that the US wants to grab the oil supplies in the Gulf or elsewhere in the region is not the case. Saudi Arabia’s oil is owned by Saudi Arabia and produced by Saudi Arabia and the US is not going to take that oil and has no intention of doing so. The other myth, of course, is that there is a US dependency on oil from the region. The US is actually the biggest oil producer in the world: it doesn’t need oil imports from the Middle East.

But that doesn’t mean that the Middle East and Middle East oil isn’t critical to American imperialism. I don’t think we can understand the Gaza genocide today, or the crucial place of the Middle East in US geopolitical ambitions, without centering it in oil. This has been the case since after the Second World War. The US became the leading capitalist power globally alongside the rise of oil as the primary fossil fuel. These dual transitions in the world system were conjoined and very much fed one another — and the Middle East was the vital crucible in this process, as I discuss in some detail in the book.

Today, the rise of China and relative erosion of American power is closely connected to the Middle East’s importance to US imperialism. Because of China’s dependency on oil from the Middle East, and all of the refined and chemical products associated with it, there has been a growing connection politically as well as economically between China and the broader Middle East region. In this context, the US is attempting to reassert its primacy in the Middle East, particularly its alliances with the Gulf monarchies, in the face of this kind of encroachment of China’s influence.

If we ever got to a situation where the US wants to place sanctions on China, for example, a key question is going to be where China gets its oil and its access to the Middle East’s oil supplies. It’s also going to be a question of the currency in which China trades and the role of the US dollar in the global financial system. One of the ways that Russia has attempted to get around sanctions is to trade more in renminbi (Chinese yuan). China is also looking at oil trading with the Gulf in renminbi rather than US dollars, which again would play a major role in the event of any kind of US sanctions or any kind of heightening conflict between the US and China. We also need to think about the huge quantities of petrodollars that have accumulated in the Gulf — we’re talking trillions of dollars here. Where those funds are invested and what role they play in supporting the US dollar is a really important part of the story.

To come back to the wider geopolitics of the region, historically, the US had two major pillars of influence and power in the Middle East. One was Saudi Arabia and the Gulf monarchies, and the second was Israel, particularly after the 1967 war. And what the US has tried to do over the last couple of decades is bring these two pillars together: to normalize relationships between the Gulf and Israel under American hegemony. And it has been able to do that to a significant degree. The United Arab Emirates have normalized with Israel, and so has Bahrain. Saudi Arabia has openly said it would be willing to do so if there was some settlement around Palestine. So these two pillars of American power remain absolutely critical to US influence and this attempt by the US to reassert its dominance in the Middle East.

This is ultimately why the US continues to fund, support and back Israel and its war against the Palestinian people, and now across the wider region. This is an attempt to reassert American power in the face of the kinds of rivalries that we see emerging globally. The Middle East is such an important part of this global picture because of the ongoing centrality of oil to capitalism.

This interview has been edited for clarity and length. James Wilt is a Winnipeg-based PhD candidate and freelance writer. His latest book is Dogged and Destructive: Essays on the Winnipeg Police.

Is the Food Industry Concealing Possible Destruction of the Tropics From the Public?

BY EMMA RAE LIERLEY

 JULY 24, 2024
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Photograph Source: Photo by CEphoto, Uwe Aranas – CC BY-SA 3.0

Palm oil is one of the most used vegetable oils in the world and is found in a large variety of packaged products, from shampoos and lipstick to cookies and frozen pizza. Unfortunately, the production of palm oil has been linked to severe environmental and social costs, including significant rainforest destruction and human rights abuses, particularly in countries like Indonesia and Malaysia, which together account for around 85 percent of global exports.

In the United States, out of the seven commodities that were linked to forest destruction, palm oil was the most “significant contributor” to deforestation, according to a March 2024 report. This report by Trase, a “data-driven transparency initiative,” is based on an analysis of figures from October 2021 to November 2023. “[T]he United States’ direct imports of seven forest risk commodities… [are] exposed to at least 122,800 hectares of tropical and subtropical deforestation. This is an area comparable in size to the city of Los Angeles,” states the report.

If any part of the palm oil supply chain is linked to the destruction of rainforests and peatlands or human rights abuses, the product is known as Conflict Palm Oil.

According to a May 2024 report by my organization, Rainforest Action Network (RAN), palm oil is increasingly being used “as an animal feed additive,” however, “much of the international trade in palm oil-based animal feed is obscured for consumers and other stakeholders.”. This lack of transparency raises questions about the actual role of the world’s largest palm oil traders in deforestation and social conflict.

Responding to this crisis and bowing to consumer and stakeholder pressure, many companies have adopted the “No Deforestation, No Peatland, No Exploitation” (NDPE) policy to ensure responsible production. This corporate pledge is meant to prevent further deforestation, safeguard “High Conservation Value” (HCV) areas, eliminate new development on peatlands, and protect Indigenous communities.

Hidden Palm Oil in Animal Feed

Palm oil is found in many foods and household products, but it’s also used in animal feed, especially for dairy cows, and ends up in products like milk, cheese, ice cream, and chocolate. Because it is an indirect ingredient, it is known as “embedded palm oil”—often hidden and not included in companies’ deforestation-free commitments. An analysis of 2022 data by RAN revealed that palm oil-based animal feed was the largest category of palm oil products imported to the United States.

Our research reveals that most companies—15 out of 17—importing palm oil-based animal feed into the U.S. lack NDPE policies, thereby increasing the risk of deforestation and human rights abuses. Companies must include palm oil-based animal feed in their NDPE policies and deforestation-free commitments and be transparent about using palm oil in their supply chains.

Major companies like Nestlé and Ferrero make claims about lessening the impact of deforestation across their product lines. These claims are misleading because vast amounts of palm oil are enteringtheir supply chain as animal feed is not included in their accounting.

Dairy companies like Lactalis, Danone, and Fonterra are not taking enough action to ensure their products, such as milk, cheese, and chocolate, do not contribute to deforestation. Only Unilever provided an estimate to our researchers about how much palm oil-based animal feed forms part of its supply chain. Swedish-Danish company Arla has promised that there will be no palm oil in its milk supply network by 2028, ensuring it is deforestation-free.

Our research estimates that if Nestlé accounted for the embedded palm oil in its supply chain, its claim of being 96 percent deforestation-free could drop to 72 percent (in terms of crude palm oil equivalent).

Increasing Demand for Palm Oil-Based Animal Feed

Initially, animal feed contained palm kernel expeller (PKE), a co-product of crushing palm kernels. Now, new palm oil additives, known as “palm fat,” “palmitic acid,” “rumen-protected fats,” or “calcium salt” (when fortified with calcium), are used in cow diets to boost milk production and quality. These additives have become popular, especially in North America. In Canada, up to 90 percent of farmers use these additives for their dairy cows. (Similar U.S. statistics are unavailable because there is very little industry oversight about its use.)

Palm oil-based animal feed, especially calcium salt, was mainly exported from Indonesia and Malaysia to countries with large dairy industries, including the U.S., the European Union, Japan, Australia, New Zealand, South Africa, and various Middle Eastern and South American countries from 2020 to 2021. Another additive, palm fatty acid distillate (PFAD), is a product of the palm oil refining process and was previously considered a waste product.

High demand for PFAD means it’s now considered an essential part of the palm oil market. Its use is not only limited to animal feed but extends to other products as well, such as biofuels, soaps, and candles. PFAD, therefore, sells for 80 percent more than palm oil. This raises concerns about its production, leading to deforestation and peatland loss, similar to virgin palm oil. Stearin, a triglyceride, is another co-product used in animal feed and foods like margarine and bakery shortening.

Tracking palm oil-based animal feed in global trade is challenging due to a lack of specific trade codes. According to our analysis of more than 30,000 shipments of palm oil products to the U.S. in 2022, feed-grade palm oil was the largest imported category of such products, making up more than a third of U.S. palm oil imports.

Most of these products came from Indonesia, where palm oil production is closely associated with deforestation. This illustrates the significant role of palm oil-based feed in causing environmental degradation.

Embedded Palm Oil Hidden in Global Supply Chains

Many consumer goods companies that adopt NDPE policies claim their supply chains are “deforestation-free,” but they often fall short and fail to meet these expectations. Our research, based on data from 2022 and 2023, indicates that only three of the ten leading consumer goods companies had NDPE policies that they implemented for all their forest-risk commodity supply networks. Additionally, none of these ten companies fully implemented NDPE policies, putting their deforestation-free claims into question.

One of the main issues is that palm oil supply chains, which comprise several co-products and intermediaries, are difficult to track. As a result, palm oil-based animal feed is often unmonitored in company reports. The best practice would be to ensure that all suppliers of palm oil products adopt NDPE policies. Some companies report on the use of soy-based animal feed but not palm oil. The Consumer Goods Forum, an industry-led network of more than 400 companies, includes soy-based feed in its roadmaps, created for various commodities to ensure “forest positive production,” but omits palm oil. If NDPE policies were to cover all parts of the supply chains that use palm oil-based products—including animal feed—companies could avoid sourcing Conflict Palm Oil and making misleading deforestation-free claims.

Major Dairy and Consumer Goods Companies Feeding the Demand

Our researchers analyzed the policies of 14 of the world’s largest dairy and consumer goods companies to see if they ensure that palm oil-based animal feed in their supply chains meets NDPE standards. These companies drive demand for palm oil-based animal feed by producing dairy, chocolate, and other processed foods. The companies analyzed include Arla, Dairy Farmers of America, Danone, Ferrero, Fonterra, FrieslandCampina, Lactalis, Mars, Mengniu, Mondelēz International, Nestlé, Saputo, Unilever, and Yili.

Out of the 14 major companies, only Arla has a strong NDPE policy that covers palm oil in animal feed. However, the company won’t execute the embedded palm oil part of the policy until 2028. This is later than the 2025 deadline set by the EU, where “products that contain palm oil will have to be proven deforestation-free by the beginning of 2025,” according to the RAN report. The other 13 companies either have weak policies or none, which means they might still be linked to deforestation and human rights abuses.

Only seven companies, including Arla, Danone, and Unilever, admit that palm oil-based animal feed is a risk for deforestation. Furthermore, most companies don’t discuss how much embedded palm oil they use. Unilever is an exception, revealing it used 30,000 tonnes of palm oil in its dairy products in 2022, though it didn’t explain how it calculated this figure.

Meanwhile, some companies make misleading claims about being deforestation-free. For instance, Nestlé says 96 percent of its “primary supply chain” of palm oil was deforestation-free in 2023 but doesn’t count the palm oil in animal feed. Without better policies and honest reporting, consumers cannot trust these claims. Companies must include embedded palm oil in their policies and be more transparent to ensure the protection of our forests.

The European Deforestation Regulation and Palm Oil-Based Animal Feed

In June 2023, the EU introduced regulation 2023/115, also called the EU Deforestation Regulation (EUDR). This regulation mandates companies trading in products like cattle, cocoa, coffee, palm oil, rubber, soy, and wood to ensure that these products are not linked to deforestation activities.

This policy affects companies that source their milk or dairy products from the region. European companies like Arla, Danone, Ferrero, FrieslandCampina, and Lactalis, as well as Nestlé and Unilever, have significant operations within the EU and are affected by this regulation. Danone claims 91 percent of its supply chain is deforestation-free. But if, for example, 10 percent of its dairy cows were to be given palm oil-based feed, substantial palm oil could enter its supply chain without NDPE guarantees.

Ferrero and Mars make deforestation-free claims for their palm oil supply chains but do not account for embedded palm oil in animal feed, making their claims misleading. Both companies lack transparency in their methodologies and rely on second-party rather than independent third-party verification.

Lack of Proper Regulation for Monitoring Palm Oil-Based Animal Feed Trade

Exporters are crucial in the palm oil supply chain, but it is challenging to identify them and ensure they follow the NDPE policy. RAN’s analysis of customs data from 2022 found that about 25 percent of exporters shipping palm oil-based animal feed from Indonesia and Malaysia to the U.S. were either unknown or listed as logistics companies.

Among the known exporters, around two-thirds of the feed-grade palm oil products entering the U.S. during the same year were not covered by public NDPE policies. The two largest exporters from Indonesia and Malaysia, Jati Perkasa Nusantara and Nutrion International, accounted for nearly one-third of total exports of palm oil products; they both lacked NDPE policies.

While nine exporters had NDPE policies, they were not reporting adequately on their implementation. These policies are only effective with proper monitoring and independent verification. Most exporters rely on self-reported compliance instead of independent checks regarding the execution of the policy guidelines. A lack of policies and traceability means European importers will struggle to ensure their products are deforestation-free, risking non-compliance with the EUDR.

Meanwhile, according to RAN’s report, out of 17 importers of feed-grade palm oil products to the U.S., most were not covered by NDPE policies.

Only two importers had published NDPE policies: Wilmar International and Perdue AgriBusiness, which accounted for just 12 percent of imports. The largest importers, Nutrition Feeds and Global Agri-Trade Corporation, responsible for 57 percent of palm oil products imports, didn’t adhere to NDPE commitments. Overall, 84 percent of the palm oil-based animal feed products imported by known companies to the U.S. in 2022 were not covered by NDPE policies.

The Paradox of Self-Governance

Profit-based corporations that have adopted NDPE policies are often in an uncomfortable position. By taking the pledge, a company would have to bear the financial cost of implementing it. By not taking the pledge, a company would sustain a blow to its public image. In a 2023 paper published in the Journal of Business Ethics, Janina Grabs, associate professor of sustainability research at the University of Basel, Switzerland, and Rachael D. Garrett, a professor of conservation and development at Cambridge University, United Kingdom, call this a “paradox” in “goal-based sustainability governance” while referring to the Indonesian palm oil sector.

“You cannot have both [no deforestation and smallholder inclusion]; you can have one, you can have the other,” a large integrated supply chain company representative told them during the anonymous interviews they conducted as part of their research. “And if you want to have both, you have to put some skin in the game and say, I will support change, and it will cost me. The problem is, if your neighbor doesn’t do it, your marketing team is going to say, ‘Why do we do that? We’re going to get hit, and we’re going to lose market shares.’ It’s an uncomfortable balance to find.”

The Role of the Consumer Goods Forum

The Consumer Goods Forum comprises leaders from 400 big retailers and manufacturers, including Danone, Nestlé, and Unilever. These companies sell products worth euro 4.6 trillion, many containing palm oil. In 2010, the CGF promised to stop deforestation by 2020 but has failed to meet this goal.

In 2020, the CGF started the Forest Positive Coalition to stop deforestation in supply chains. This coalition has a Palm Oil Roadmap to ensure responsible palm oil use by adopting NDPE policies. “However, the CGF’s methodology for calculating ‘Palm Oil Deforestation and Conversion Free’ volumes does not state the need to ensure volumes include the volume of palm oil used in animal feed. This is in contrast to the methodology for soy, which details the types of ‘embedded soy’ products that need to be included,” points out the RAN report. This omission could result in misleading deforestation-free claims by its members and the Forest Positive Coalition.

To stop deforestation, the CGF must enforce NDPE policies for all palm oil products, including animal feed, and ensure transparent reporting.

Policies and Transparency Are Essential

With climate change and biodiversity loss worsening, stopping the production and use of Conflict Palm Oil and preventing environmental and social injustices globally is crucial. Companies need transparent, well-monitored supply chains to ensure adherence to global regulations and sustainability promises. It is no longer acceptable to let millions of tons of palm oil, especially in animal feed, enter the U.S. without proper tracking.

The solution to this problem is simple: All companies must adopt a strict NDPE policy that includes embedded palm oil. The Consumer Goods Forum’s 400 companies and palm oil importers and exporters must also follow this policy. Brands must be honest about the products used in their supply chains and take tangible steps to stop human rights abuses and deforestation.

Transparency and companies taking responsibility for their actions are critical to protecting forests and upholding Indigenous Peoples’ rights.

This article was produced by Earth | Food | Life, a project of the Independent Media Institute. 

Emma Rae Lierley is a senior communications manager at Rainforest Action Network. She is a contributor to the Observatory.