The Impact of Economic Shocks on the Competitiveness of Leading Vegetable Oil in International Market

Document Type : Research Paper

Authors

1 Faculty of Economics and Management, IPB University, Bogor, Indonesia; National Research and Innovation Agency, Jakarta, Indonesia.

2 Department of Agribusiness, Faculty of Economics and Management, IPB University, Bogor, Indonesia

10.22059/ier.2024.368564.1007862

Abstract

The development of the biofuel industry has increase the price of world vegetable oil, resulting in changes in competitiveness among world-leading vegetable oils. The research aims to analyze factors influencing the competitiveness of the leading vegetable oils and the impact of economic shocks on the competitiveness of the leading vegetable oils in international market. This research utilized secondary data spanning from 1990 to 2022, encompassing information from UNCOMTRADE and World Bank with the Almost Ideal Demand System model. This research used the Seemingly Unrelated Regression as estimation method for estimating coefficients. The research results showed that the price of other vegetable oils, expenditure, and the price of crude oil are factors that influence the competitiveness of palm oil. Factors that influence the competitiveness of soybean oil are palm oil prices, expenditure and population. Factors that influence the competitiveness of sunflower oil are the price of soybean oil, expenditure, crude oil prices, and population. Palm oil competitiveness benefited from the economic shocks coming from the increase in world vegetable oil prices (own price elasticity -0.670), crude oil prices (crude oil price elasticity 10.055) and income (expenditure elasticity 1.372). This research recommends that major vegetable oil exporters should formulate policies to synergize domestic and export needs. Main biofuel-producing countries need to collaborate with the leading palm oil exporting countries because, in the future, more palm oil will be used to meet domestic needs. This study contributes to the international trade strategy, competitiveness, and biofuel industry development. It also supports the existing findings.

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Iranian Economic Review

Articles in Press, Accepted Manuscript
Available Online from 12 February 2024

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