Asian Palm Oil Production and European Vegetable Oil Market: What Can We Learn in Terms of Sustainability?

Abstract

Palm oil production has had an extraordinary evolution since 2000, especially in Southeast Asian countries. Its profitability is related to lower market prices due to it having the cheapest production costs, compared to the other EU oils. Market forces have stimulated its production and trade, with a shift in the use of land in tropical countries (particularly in Southeast Asia). Palm oil has a high smoke point for its saturated fatty acid content, which is much healthier than the performance of conventional oils produced and used in Europe (corn, sunflower and peanut oil). The controversy of which palm oil has been the subject is linked to the environmental sustainability aspects of the production process. According to the European Commission, palm oil cultivation over the past 20 years has been the cause of 20% of global deforestation. However, our results highlighted that the price trends of selected vegetable oils are related to their variations. This allows the advancing of some hypotheses. On the supply side, the production costs (decisively in favour of palm oil) and the environmental constraints are affecting the vegetable oil market. On the demand side, the number and price, on the one hand of substitute products, and on the other hand of the complementary good as well as consumer taste and preference, all influence consumer behaviour. Consumer income and its distribution and, in both cases, public policies affect the various choices to be made. Public action should therefore consider these variables. A single policy may not be sufficient to steer the market in the right direction, especially in the logic of market globalisation.