Why people BELIEVE coconut oil is bad for you

...the domestic oil industry viewed with alarm the competing interest of the imported oils. In 1986, ... the American Soybean Association (ASA) launched a series of attacks that became known as the "tropical grease campaign." ... The face-off was not between tropical and temperate-climate oils, but rather between domestic and imported ones. ...

This effort was abetted by a self-styled consumer crusader, Phil Sokolof, who waged his own campaign against these oils. He established and funded the National Heart Savers Association, and paid for full-page advertisements in nationally distributed newspapers, with the dramatic headline "The Poisoning of America!" He charged that tropical oils destroy life or impair health. The combined campaigns of Sokolof and ASA convinced many consumers that tropical oils were unhealthy, and consumers should be warned on product labels.
...The ASA viewed potential legislation on labeling as its "biggest weapon" against foreign-oil producers. ... [It is interesting to note that] U.S. Trade Representative Clayton Yeuter admitted that "the main objective of the proposed tropical labeling legislation was to protect the domestic oil industry." [Also,] The Institute of Shortening and Edible Oils charged: "The health angle is a smoke screen for a trade issue. …Specific labeling of foods in regard to their content of the so-called tropical oils is clearly discriminatory and without scientific basis."

...The campaign succeeded in having major food processors reformulate their products with domestically produced oils. According to food writer Jane Heimlich, the anti-tropical-oil campaign resulted in a switch to "true artery-clogging horrors - partially hydrogenated oils." The reformulation created problems. Palm and coconut oils resist oxidation and are highly stable. They do not require hydrogenation, and are trans-free. However, many of the domestic oils are predominantly polyunsaturated, which makes them quite unstable, and subject to oxidation. To make them more stable, they need to be hydrogenated. ...

Food processors switched reluctantly [because] Palm and coconut oils [are advantageous in] food processing. Palm oil can be separated readily.... Manufacturers can make bakery shortening from [palm], [resulting in a] food product [that] has no trans fats. ...Palm and coconut oils are highly suitable for frying because of their high oxidative stability.

... [These oils] do not require hydrogenation. Unlike many other vegetable oils, extraction can be done without the use of harsh chemical solvents. These oils have low foaming tendencies when heated, so they do not require the use of anti-foaming agents. Because these oils have high smoke points, they resist polymerization and oxidation. These features benefit food processors, but do they harm consumers? The aggressive campaign against these oils was intended to make consumers fearful of unhealthy qualities in the oils, and to pressure food processors to eliminate them.

However, the scientific evidence demonstrates that palm and coconut oils are healthful.

Summarized from http://www.coconutresearchcenter.org/article10027.htm