Commentary: Fuel strategy: Between dumb and conspiracy theory

Endy M. Bayuni ,  Jakarta   |  Mon, 05/12/2008 10:51 AM  |  Headlines

President Susilo Bambang Yudhoyono would have won praise for his decision to raise domestic fuel prices closer to world oil levels, were it not for his appalling strategy for announcing it, which left the public guessing about the timing and size of the increase.

Ever since he disclosed his intention before a meeting with media leaders on Monday, predictable things have happened. Several towns quickly experienced fuel shortages that led to long lines at gas stations. Other associated sources of energy, like gas and kerosene, are quickly disappearing.

Some totally unrelated products like cement and construction materials are also hard to acquire, as traders hold onto them to sell once they know how to price them. In anticipation of an increase in fuel prices, the prices of basic food staples have also gone up.

What was the President thinking?

A strategy gone sour?

This is not all that new to Indonesia. Since late last year, we have heard about fuel shortages hitting major cities, including Denpasar in Bali. Now the pressure on fuel supplies has gone a notch higher, as more people join in a game that had hitherto been played by a few people.

Traders, speculators, industrialists and crime syndicates have been largely responsible for the higher than predicted fuel consumption in the first four months of this year. Industrialists have been buying subsidized fuel from the open market (no one is policing it although it is illegal), and traders and retailers are hoarding it in anticipation of an inevitable price increase. The more daring ones, in collusion with powerful institutions, have been smuggling fuel products (some of which were imported) out of the country.

The margin between what we now pay for subsidized gasoline at gas stations and world oil markets -- $60 dollars a barrel -- is just too mouth-watering for the criminally minded to pass up, either through smuggling, hoarding or making the conversion to subsidized fuel.

Now that it is certain the government will increase prices, the conversion, smuggling and hoarding have only intensified. Ordinary people have joined the game, not necessarily to make profit but sometimes just to be on the safe side. No sane motorist would want to be caught without gasoline, so they fill up more often than they ordinarily would.

Vice President Jusuf Kalla's announcement that the increase will take place at the end of May has only added more pressure. His disclosure that the government will increase prices by 30 percent helps smugglers and hoarders do the calculations of the profits and losses and risks involved.

You didn't need to be a military strategist or have a doctorate in agriculture to predict that hoarding, conversion, smuggling and panic buying would ensue as a result of last week's announcement.

If you were around in the 1980s, you would have learned that each time the government intends to increase the price of fuel (because the subsidy has become unsustainably high like it has today), panic buying follows, affecting not just gasoline; shelves in supermarkets used to be emptied in a matter of hours after the announcement as people feared soaring inflation.

President Soeharto eventually learned to announce fuel price increases one or two hours before midnight to limit the damaging effects of likely panic buying. Of course, his cronies would have known of the plan well ahead of others and made a big killing.

This raises a question -- is President Yudhoyono simply a bad strategist (or was poorly advised by one), or is there something more hideous about the way he announced the plan?

By now we have become so accustomed to the ridiculousness of government strategies that it is easy simply to accept this latest one as another poorly thought out move.

Recall the announcement by the anti-corruption agency KPK, that it would raid the house and office of a member of parliament three days before executing the raid, thus giving the lawmaker in question time to clear out any incriminating evidence.

What about the police announcing that so-and-so would be arrested in connection with a corruption case, giving him or her time to flee? And another time when the police publicly said they had cornered the two most wanted terrorist suspects in the country and that they would be arrested within a day or two, which of course never took place.

Plain dumb or conspiracy? Take your pick.

Similarly, is this strategy on fuel prices a cue for certain people to hoard and smuggle as much as they can until they make enough money? With the presidential election just a year away, and candidates needing as much money as they can get, this line of thinking is certainly tempting -- though dangerous. Conspiracies are always hard to prove. They remain a theory.

In searching for an explanation for the chaos caused by last week's announcement, we are left to choose between a conspiracy theory or a dumb strategy. For now, we will go with the latter.

Copyright © 2008 The Jakarta Post - PT Bina Media Tenggara. All Rights Reserved.