A prominent institute has warned that global oil prices could climb above US$150 a barrel, and that the government should prepare for the worst.
In a news conference here Wednesday, the Indonesian Institute of Sciences (LIPI) said Indonesia needed to begin developing concrete policies to deal with continually rising oil prices.
It also said the government should integrate its cash assistance scheme, designed to help low-income families cope with higher fuel prices, into the country's poverty alleviation programs.
The state-run institute also suggested the government stop fixing domestic fuel prices against volatile global oil price movements.
LIPI senior researcher Wijaya Adi said recent surges in global prices of crude oil and food caught Indonesia by surprise because it did not have the policies in place to deal with the phenomenon.
"Although we have felt the increase of food and oil prices since October 2006, nothing was done by the government about it because they had no plans," he said.
Instead, he said, the government hastily enacted national policies and schemes only after large protests at the beginning of the year by people feeling the squeeze of higher prices.
Wijaya said nobody could predict how high global oil prices would go, but LIPI believed oil could hit more than $175 per barrel.
He said LIPI wanted the government to let domestic fuel prices float against world oil prices, although the domestic prices could be made 75 or 80 percent lower than global prices.
By consistently following world oil prices, the government would not have to announce fuel price rises every time global prices reached a new level, Wijaya said.
The government raised fuel prices by an average of 28.7 percent last Friday to help salvage the state budget, which has been strained by soaring crude oil prices.
To help offset the impact of the rise on the poor, the government is providing cash transfers of Rp 100,000 per month and 15 kilograms of subsidized rice to 19.1 million low-income families through the end of 2008.
LIPI urged the government to integrate its anti-poverty programs, such as direct cash assistance, rice for the poor, cheap or free healthcare and school aid, under one disbursement mechanism.
"Every ministry should put away its ego and let the poverty alleviation programs they handle be taken away and put into one integrated institution, which will issue an integrated card," Wijaya said.
In the longer term, he said, Indonesia should increase its oil production and make serious efforts to attract foreign investment in the oil and gas industry to benefit from higher global prices.
"That means we have to amend our gas and oil law, which has discouraged new investment in this sector.
"I think we can reach an oil production level of 1.5 million barrels per day. We could then meet our domestic consumption of 1.3 million barrels and export the rest," he said.
