New Delhi (PTI): Skyrocketing vegetable oil prices have reduced the global demand by 26.6 per cent to four million tons during oil year 2007-08, Director of Godrej International Dorab E Mistry said.

"For the oil year 2007-08, we have already lost one million tons of food demand and about 5,00,000 tons of bio-diesel demand as a result of high prices," Mistry said in the latest paper, which was released by Solvent Extractors Association.

Oil year runs from October-September 2007-08.

The global demand for vegetable oil slipped to four million tons, against supply of 5.45 million tons.

"Incremental supply exceeded incremental demand by almost 1.5 million tonnes and the bulk of this excess has come in the second half of the year," Mistry said.

He said that the signs of 'demand destruction' due to high prices were evident in June. "I believe the strong price rises of the first quarter of 2008 finally began to meet resistance in the second quarter and got reflected in the volume of business transaction during June."

"We saw strong evidence of this in the case of sunflower oil and soya oil," he noted.

However, some of the lost demand may be re-captured in 2008-09 but this is going to be the function of prices, he added.

For 2008-09 oil year, vegetable oil supply is projected to be at 6.8 million tons and demand at 6.5 million tons, he said, adding that "we are already seeing big increase in the production of sunseed and rapeseed."