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United States and biodiesel factories in Europe, soaring prices for the oil
are drawing environmentalists, energy companies, consumers, indigenous
peoples and governments into acrimonious disputes.

The oil palm is a stout-trunked tree with a spray of frilly fronds at the top
that make it look like an enormous sea anemone. The trees, with their
distinctive, star-like patterns of leaves, cover an eighth of the entire land
area of Malaysia and even greater acreage in nearby Indonesia.

An Efficient Producer

The palm is a highly efficient producer of vegetable oil, squeezed from the
tree’s thick bunches of plum-size bright red fruit. An acre of oil palms
yields as much oil as eight acres of soybeans, the main rival for oil palms;
rapeseed, used to make canola oil, is a distant third. Among major crops,
only sugar cane comes close to rivaling oil palms in calories of human food
per acre.

Palm oil prices have jumped nearly 70 percent in the last year because supply
has grown slowly while demand has soared.

Farmers and plantation companies are responding to the higher prices,
clearing hundreds of thousands of acres of tropical forest to replant with
rows of oil palms. But an oil palm takes eight years to reach full
production. A drought last year in Indonesia and flooding in Peninsular
Malaysia helped constrain supply. Worldwide palm oil output climbed just 2.7
percent last year, to 42.1 million tons.

At the same time, palm oil demand is growing steeply for a variety of reasons
around the globe. They include shifting decisions among farmers about what to
plant, rising consumer demand in China and India for edible oils, and Western
subsidies for biofuel production.

American farmers have been planting more corn and less soy because demand for
corn-based ethanol has pushed up corn prices. American soybean acreage
plunged 19 percent last year, producing a drop in soybean oil output and
inventories.

Chinese farmers also cut back soybean acreage last year, as urban sprawl
covered prime farmland and the Chinese government provided more incentives
for grain.

Yet people in China are also consuming more oils. China not only was the
world’s biggest palm oil importer last year, holding steady at 5.2 million
tons in the first 11 months of the year, but it also doubled its soybean oil
imports to 2.9 million tons, forcing buyers elsewhere to switch to palm oil.

Concerns about nutrition used to hurt palm oil sales, but they are now
starting to help. The oil was long regarded in the West as unhealthy, but it
has become an attractive option to replace the chemically altered fats known
as trans fats, which have lately come to be seen as the least healthy of all
fats.

New York City banned trans fats in frying at food service establishments last
summer and will ban them in bakery goods this summer. Across the country,
manufacturers are trying to replace trans fats. American palm oil imports
nearly doubled in the first 11 months of last year, rising by 200,000 tons.

“Four years ago, when this whole no-trans issue started, we processed no palm
here," said Mark Weyland, a United States product manager for Loders
Croklaan, a Dutch company that supplies palm oil. “Now it’s our biggest
seller.”

Last year, conversion of palm oil into fuel was a fast-growing source of
demand, but in recent weeks, rising prices have thrown that business into
turmoil.

Here on Malaysia’s eastern shore, a series of 45-foot-high green and gray
storage tanks connect to a labyrinth of yellow and silver pipes. The gleaming
new refinery has the capacity to turn 116,000 tons a year of palm oil into
110,000 tons of a fuel called biodiesel, as well as valuable byproducts like
glycerin. Mission Biofuels, an Australian company, finished the refinery last
month and is working on an even larger factory next door at the base of a
jungle hillside.

But prices have spiked so much that the company cannot cover all its costs
and has idled the finished refinery while looking for a new strategy, such as
asking a biodiesel buyer to pay a price linked to palm oil costs, and someday
switching from palm oil to jatropha, a roadside weed.

“We took a view that palm oil prices were already high; we didn’t think they
could go even higher, and then they did,” said Nathissue on Borneo.

Anne B. Lasimbang, executive director of the Pacos Trust in the Malaysian
state of Sabah in northern Borneo, said that while some indigenous people had
benefited from selling palm oil that they grow themselves, many had lost
ancestral lands with little to show for it, including lands that used to
provide habitats for endangered orangutans.

“Finally, some of the pressures internationally have trickled down. Some of
the companies are more open to dialogue; they want to talk to communities,”
said Ms. Lasimbang, a member of the Dusun indigenous group. “On our side, we
are still suspicious.”

Demand Outstrips Supply

As the multiple conflicts and economic pressures associated with palm oil
play out in the global economy, the bottom line seems to be that the world
wants more of the oil than it can get.

Even in Malaysia, the center of the global palm oil industry for half a
century, spot shortages have cropped up. Recently, as wholesale prices
soared, cooking oil refiners complained of inadequate subsidies and cut back
production of household oil, sold at low, regulated prices.

Street vendors in the capital, Kuala Lumpur, complain that they cannot find
enough cooking oil to prepare roti canai, the flatbread that is the national
snack. “It’s very difficult; it’s hard to find,” said one vendor who gave
only his first name, Palani, after admitting that he was secretly buying
cooking oil intended for households instead of paying the much higher price
for commercial use.

Many of the hardest-hit victims of rising food prices are in the vast slums
that surround cities in poorer Asian nations. The Kawle family in Mumbai’s
sprawling Dharavi slum, a household of nine with just one member working as a
laborer for $60 a month, is coping with recent price increases for palm oil.

The family has responded by eating fish once a week instead of twice, seldom
cooking vegetables and cutting its monthly rice consumption. Next to go will
be the weekly smidgen of lamb.

“If the prices go up again,” said Janaron Kawle, the family patriarch, “we’ll
cut the mutton to twice a month and use less oil.”

Contributing reporting were Andrew Martin in New York, Anand Giridharadas in
Kale, India, and Michael Rubenstein in Mumbai.