Who pays the real price for Palm Oil?

Do you know what is the common ingredient in an ice cream, pizza dough, lipstick, detergent or a candle? Most people do not! The answer is Palm Oil. This precious commodity has gained global popularity in the last two decades when the demand for it exploded. Today palm oil is the largest vegetable oil in the world in terms of production volume. Actually around 50% of the goods we use every day contain palm oil. What’s more, the forecasts suggest an increase in the commodity consumption. Two simple reasons can explain this trend.

First of all, palm tree has very high oil content. Actually the palm tree is the most efficient vegetable oil crop in the world. An oil palm produces 10 times as much oil per hectare as rapeseeds, 6 times as much as soybeans and 3 times as much as coconuts. The chart below shows graphically the difference between the production capacity of oil palm tree compared with other oil crops.

The other driver is the low trading price of the commodity. In fact, palm oil is the cheapest oil available on the market today. The low price, partly explained by the high productivity of the commodity, attracts many buyers from different industries. Today nearly 65% of all palm oil is used in the food industry, another 30% in the cosmetics and just 5% for biofuel. This shows why consumers awareness plays a major role in how the commodity is being produced.

However there is another, darker side of the palm oil industry. Some speculators suggest that the low price can be explained also by large volume of externalities which are not being accounted for by the companies. Serious environmental and social issues are often discussed in relation to the palm oil production. Orangutans, elephants, rhinos and tigers are competing for their habitat together with the palm oil producers. The conversion of tropical forest into plantations result in significant CO2 emissions increase. Deforestation, Habitat Loss, Species Extinctions and Climate Change are just some of the problems. On the social spectrum, concerns related to child labour, bad working conditions, low wages and indigenous people’ rights are debated. The low prices today are nothing more than long-run costs that will be paid by us, the consumers, in the form of air pollution and climate change catastrophe.

We should exercise our consumer power over the involved companies and keep them accountable for their actions. The power is in your palm!

Nadya Mileva

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