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Govt to keep an eye on oil prices, projected to surge to $100 by year-end
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Oily business: Exploration is underway on June 7, 2023, at the Kuala Simpang Barat (KSB) oil field, which belongs to state-owned Pertamina EP Rantau Field in Sriwijaya village in Aceh Tamiang regency, Aceh. (Antara/Dede Harison)
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he government will keep a watchful eye on crude oil prices, which are expected to surge by the end of this year. The Finance Ministry says it is prepared to carry out stress testing if needed to anticipate any impact on the state budget, particularly energy subsidies.
Goldman Sachs, Citigroup and others are predicting that the crude oil price will rise to over US$100 per barrel by 2024, following production cuts by Russia and Saudi Arabia, which many fear will cause slowed global growth and prolonged high inflation.
The ministry’s Fiscal Policy Agency (BKF) head of central macroeconomics policy Abdurohman said it has carried out some stress tests in the past to measure such impacts to the state budget and the most recent was completed in early 2022 when crude oil prices rose to around $120 per barrel.
“In January [2022] we did some stress testing to see if the state budget will be impacted significantly by the movement of the oil price,” said Abdurohman on Monday.
However, the ministry has yet to determine the possible impacts of the expected oil surge this year. Abdurohman did not expect this year’s average oil price to touch the $100 mark as projected by many analysts in the United States.
Given that the new budget was only agreed upon last week, he said that the ministry will not take the move until the start of next year, unless oil prices rise considerably.
By then, Finance Minister Sri Mulyani Indrawati will have ordered her team to work out some scenarios to anticipate the gush using policy, Abdurohman asserted.
