Given the presidential election later next year, it must be a great temptation for President Susilo Bambang Yudhoyono to lower domestic fuel prices since international crude oil prices have fallen steadily from their peak of US$147/barrel in July to below $70/barrel.

Several House members have also hinted at the need to cut our pump prices as oil prices have been languishing below the average $95 price assumed for the entire year.

But we beg to differ, seeing instead the current condition as the time to float our fuel prices based on international market quotations as we did in 2002.

Such a bold measure could unleash stronger market incentives to force oil conservation and efficiency and spare the government the political turbulence anytime fuel prices must be adjusted because of significant changes in international prices.

It would be entirely misguided, both politically and economically, for the government to consider lowering fuel prices now despite the seemingly great benefits of such a measure for the common people.

First of all, no one can predict the future direction of oil prices, even though most analysts now foresee further price declines due to a global economic recession. Since oil prices are also influenced by non-economic factors, tying a policy measure such as the state budget or fuel subsidy to a fixed oil price is like shooting at a moving target.

Moreover, since oil prices have averaged above $110 during the January-September period, we don't know whether the $95 average price used for determining our current fuel prices will be achieved for the whole year.

Then the rupiah -- another major factor determining domestic fuel prices -- has tended to depreciate since the height of the U.S. financial crisis last month, now hovering between Rp 9,500 and Rp 9,700 to the dollar. The average rate for the year could still be lower than the Rp 9,100 assumed for the whole fiscal year.

Now that our fuel prices have virtually been on par with, or sometimes, even lower than international prices, the time is quite opportune to reintroduce the internationally acclaimed energy policy the government launched in 2002 when then president Megawati Soekarnoputri floated fuel prices on Mid Oil Platts Singapore (MOPS) quotations.

Our experiences from the first year of the flotation policy showed that by allowing for automatic monthly price adjustments, the government provided policy predictability for the market and the general public and protected the economy from sharp price adjustments and their shocking inflationary pressures.

The automatic monthly price adjustment, as it is now effective for industrial users, also spared the government the wasteful political bickering with the parliament anytime international oil prices fluctuated widely.

Yet most important is that floating domestic fuel prices on international levels frees the government from being hostage to the wildly volatile international oil market and removes the "fuel subsidy" time bomb from government fiscal management.

Pegging our domestic fuels to international prices, besides discouraging export smuggling, will force fuel efficiency, conservation and encourage investments in energy diversification.

The price signals conveyed by this policy will serve as the right guideline for companies to conduct in-house management of energy efficiency through maintenance and replacement of selected equipment or modification of manufacturing processes which may require large-scale investments.

As the differences between our fixed fuel prices and MOPS have become much narrower and since industrial users have long been subject to international fuel prices, pegging domestic fuel prices to international market quotations now would not likely cause a shocking impact.

The government should have drawn good, though painful, lessons from its bold moves when it increased fuel prices by 30 percent in March 2005 and again by 125 percent later in October and again by 29 percent last May.

Anytime the government moves to raise the price of fuel, irrespective of its size, there has always been some political turbulence with the parliament, not to mention the subsequent string of street demonstrations and the wave of inflationary pressures.

President Yudhoyono is well advised to realize that fuel prices have nothing to do with voters' behavior.

Then president Megawati, who was highly commended for her 2002 move to float fuel prices on MOPS, annulled the policy in 2004, even when international oil prices had risen steadily, presumably in a bid to gain more votes in the country's first direct presidential election in September 2004.

But her backtracking policy did nothing to bolster voter support. She lost to Yudhoyono.

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