Vegetable Oil Prices Explained

Vegetable oil prices across regional markets as most edible oil stocks are down for the 2025-2026 market year. Additionally, President Trump’s proposed blanket import tariffs are a potential disruption to global vegetable oil supply chains (particularly canola oil).

In line with this, the proposed US tariffs on vegetable oils will significantly affect Europe’s biodiesel and non-biodiesel production margins as the region imports more than 50% of the commodity.

On the supply side, USDA forecasted a continuous global supply deficit in 2026 (a 13% decline in rapeseed oil stocks and a 24% drop in sunflower oil stocks) due to localized biodiesel production from top-producing countries.

Why are vegetable oil prices fluctuating?

1. Demand Dynamics

Prices for vegetable oil are impacted by the changes in supply and demand. Also, modifications to agricultural techniques, variations in consumer tastes, and meteorological conditions influence the commodity’s price.

For instance, Thomas Mielke (a leading industry analyst in Hamburg-based research firm Oil World) expressed that the market for vegetable oils is expected to tighten for a year as demand rises to generate biodiesel in Indonesia while growth in palm oil output has halted.

The prediction materialized when Malaysian refined bleached deodorized (RBD) palm olein prices rose by over 16% (amounting to $1,150 per tonne).

2. Global Economic Conditions

Vegetable oil costs are determined by economic factors such as variations in GDP (Gross Domestic Product) growth, inflation rates, and currency exchange rates.

According to the UN Food and Agriculture Organization, the price of vegetable oil reached a record high globally by 23% since the pandemic and will continue to do so as geopolitical tensions are tied to the fluctuating oil market.

Additionally, Gro Intelligence (an agriculture data platform) stated that the oils typically used by food manufacturers in the United States have increased by 152% over the previous two years, exceeding overall food inflation.

3. Government Policies and Regulations

Vegetable oil prices are subject to governmental laws and regulations, including trade agreements, tariffs, and subsidies. For instance, India’s retail inflation reached a four-month high of 5.69% in  Q4 last year due to higher prices for cereals, pulses, and some vegetables.

This prompted the government to keep importing edible oil at a reduced tariff until March 2025. The goal is to control local pricing and avoid any more significant increases. Also, the reduced structure of import duties on crude oils, such as sunflower, soy, and palm will extend over the same period.

4. Energy Prices

It is common practice to use vegetable oils as feedstocks while producing biodiesel. Thus, any changes in biodiesel demand and supply impact the price of vegetable oil.

For example, global biofuel, tightening supply, and China’s comeback into the market drove an increase in vegetable oil prices.  Additionally, the production shortage in vegetable oils while meeting the existing biofuel targets will fuel the commodity’s marketability in 2025.

Which variables impact the price of vegetable oil?

• Demand Dynamics
• Global Economic Conditions
• Government Policies and Regulations
• Energy Prices
• Climate and Weather Events

Where does vegetable oil come from?

Vegetable oil is obtained by pressing or extraction techniques from various plant sources. Typical sources of vegetable oil include the following:

1. Soybean – The most commonly consumed vegetable oil worldwide. It is taken from soybeans, a significant commodity farmed mostly in China, Brazil, Argentina, and the United States.

2. Palm Fruit – Another important vegetable oil is palm oil, which is made from the fruit of oil palm trees. Though it is grown in other tropical places, Indonesia and Malaysia are the major producers of this commodity.

3. Sunflower Seeds – They are used to make sunflower oil. The United States, Argentina, Russia, Ukraine, and other significant producers are among the countries that cultivate sunflowers.

4. Rapeseeds (Canola) – Rapeseed is mostly farmed in Canada, China, India, and some European nations. Low saturated fat and high monounsaturated fat are characteristics of canola oil.

5. Olive – It is obtained from the fruit of olive trees, which mostly grow in Mediterranean nations like Tunisia, Spain, Italy, and Greece.

6. Coconuts – The meat or kernel of mature coconuts is used to make coconut oil. Tropical countries including the Philippines, Indonesia, India, and Sri Lanka are the primary producers of it.

7. Corn (Maize) – The kernel of maize is used to obtain corn oil. Numerous nations, including the U.S., China, Brazil, and Argentina, cultivate corn as a significant crop.

8. Cottonseed – Cottonseed oil is derived from the seeds of cotton plants, which are mainly cultivated for their fiber. Pakistan, China, India, and the United States are the primary producers of it.

What are the uses of vegetable oil?

Vegetable oil is a product used in numerous sectors and applications. Among the many applications for vegetable oil are:

1. Cooking and Food Preparation – In cuisine, vegetable oils are frequently used for frying, sautéing, baking, and making salad dressings. Because of their high smoke points, they enhance flavor, moisture, and texture in food and act as a cooking medium.

2. Food Processing – Vegetable oil is used in several products, including processed foods, salad dressings, baked goods, margarine, and snacks. It serves as an ingredient, taste enhancer, and flavor carrier.

3. Biofuel Production – Some vegetable oils are used as feedstocks to make biodiesel, including soybean, palm, and rapeseed (canola) oils. Biodiesel is a renewable fuel that lowers greenhouse gas emissions and dependence on fossil fuels.

4. Industrial Applications – Lubricants, hydraulic fluids, cutting fluids, paints, varnishes, adhesives, and bio-based plastics use vegetable oils due to their lubricating qualities, biodegradability, and renewability. Additionally, they are environmentally friendly products that replace petroleum-based ones.

5. Cosmetics and Personal Care Products – Cosmetics and personal care products like moisturizers, lotions, creams, soaps, shampoos, and conditioners often contain vegetable oils as they provide hydration and nourishment to the hair and skin.

6. Pharmaceuticals – Certain vegetable oils serve as carriers for active substances in pharmaceutical formulations. Also, they are utilized in dietary supplements and herbal remedies due to their therapeutic properties.

7. Animal Feed – To support growth, health, and productivity, animal feed formulations for livestock, poultry, and aquaculture contain vegetable oils as they offer essential fatty acids, energy, and fat-soluble vitamins.

8. Non-Food Consumer Products – Many consumer goods that are not food items, like candles, soaps, detergents, and bio-based cleaning supplies contain vegetable oils.

What is the future price of vegetable oil?

The world’s continuous usage of vegetable oil and the rate of economic growth have a significant impact on its price. Also, the unpredictable stability of the top oil-producing regions in the Middle East, the current war in Ukraine, and the rapid utilization of vegetable oils in energy production contribute to its varying prices in the market. 

On the supply side, the global market will lean on the volatile weather conditions of the commodity’s producing countries. While improving seasonally, the Indonesian market (top palm oil producer), implemented the Domestic Market Obligation. This directs farmers to set aside 20% of their shipment to local buyers, preparing the country for biodiesel production. 

On the other side of the world, the ongoing war between Ukraine and Russia will continue to exert pressure on vegetable oils as these countries account for nearly 80% of global sunflower oil exports. 

On the demand side, major oil consumers continue to fuel the marketability of this commodity. EU’s Renewable Energy Directive requires vegetable oil consumption for biofuel. The region’s renewable diesel constitutes 20% palm oil. Also, California’s biofuel mandate puts pressure on US soybean oil production and consumption which necessitates additional vegetable oil for utilization. 

Overall, the market for vegetable oil is expected to grow by USD 4.46 billion in 2030, with a (CAGR) of 9.30% and its price will be $1.88 to $3.85 per kilogram.