Indonesia'€™s policy of evaluating its subsidized fuel price every three months is considered a good model by Iran and Saudi Arabia, and may be applied in the two oil-producing countries, according to an official from the Energy and Mineral Resources Ministry.

Rather than following the daily movement of oil prices in the market, the government sets the price of subsidized gasoline and diesel prices on the average price of oil in the previous three months.

"This way, the price is stable and people can predict the next price. Countries with strong economies like Singapore follow  market price, but Iran and even Saudi Arabia are interested in adopting our model," said the Energy and Natural Resources Ministry'€™s oil and gas director general, IGN Wiratmaja Puja, in Jakarta on Monday.

Under the three-month evaluation system, he continued, state-owned oil giant Pertamina could buy fuel at a lower price during a downward price trend, and sell it to the public at a higher price. Conversely, it would sell the fuel at a lower price when the price was trending upward.

"But it'€™s okay. Any losses caused by price spread will be covered by the government. That's not where Pertamina's profits come from," Wiratmaja explained, adding that the ministry applied a formula comprising Mean of Platts Singapore (MOPS)  plus Alpha (a margin for Pertamina) to estimate Pertamina'€™s gain in the subsidized fuel business.

Currently, he added, Alpha was around Rp 1,000 [US$0.075] per liter, as jointly decided by Pertamina, the government and House of Representatives Commission VII overseeing energy.

Subsidized Premium-brand gasoline is now sold at Rp 6,950 per liter, while diesel Solar costs Rp 5,650 per liter. The next price adjustment will be decided based on the average price from January to March, and will be enacted in April. (ags)

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