Volatility Analysis of Crude Palm Oil Price and Cooking Oil.

Abstract

Crude palm oil industry has bright prospect in vegetables oil competition. Nowadays crude palm oil is the most produced and consumed.. Indonesia is the biggest crude palm oil exporter contributing 46.2 percent of world’s total supply in 2011. One of palm oil based downstream industry which is important in Indonesia is cooking oil industry. Cooking oil is one of the important nine basic needs for people. Cooking oil consumption tends to increase and this condition has been fullfiled by domestic industry. This because Indonesia has surplus condition in cooking oil. Unfortunately this surplus condition doesnot guarantee low and stable price domestically. The aims of this research are to analyze volatility of crude palm oil price and cooking oil, to analyze effect of crude palm oil export policy to the volatility of palm oil price and cooking oil and to analyze effect of value added tax borne by government to the cooking oil volatility. Data used in this research is secondary data which is daily time series data, period January 2005 to March 2012. Volatility of palm oil price and cooking oil in this research is built on the basis of time series econometric methods called autoregressive conditional heteroscedasticity/ generalized autoregressive conditional eteroschedasticity (ARCH GARCH) Analysis results to price volatility of crude palm oil and cooking oil show different pattern. Volatility of crude palm oil is influenced by volatility of two previous periods, meanwhile volatility of cooking oil is influenced by volatility and variance last period. Volatility of cooking oil price is higher than volatility of cooking oil. Analysis results to progressive export tax policy of crude palm oil and value added tax borne by government towards cooking oil industry give different effect to price volatility. Implementation of Export tax policy to crude palm oil leads to constant price volatility of crude palm oil and cooking palm oil price until the end of analysis period, with the result that export tax policy can stabilize crude palm oil price and cooking oil. On the other hand value added tax borne by government towards cooking oil price leads to unstable price volatility of cooking oil until the end of analysis period. It can be concluded that value added tax borne by government cannot stabilize of cooking oil price