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SBY hints at lowering fuel prices
President Susilo Bambang Yudhoyono has hinted at his willingness to lower fuel prices, a move considered decisive in making or breaking his administration ahead of elections next year
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resident Susilo Bambang Yudhoyono has hinted at his willingness to lower fuel prices, a move considered decisive in making or breaking his administration ahead of elections next year.
Yudhoyono said Tuesday the government was studying the possibility of a fuel price cut as global crude oil prices continued their decline.
"We are studying intensively a plan to lower the fuel prices. If it's considered effective, I will make the decision to lower them," Yudhoyono said after meeting with Finance Minister Sri Mulyani Indrawati and Energy and Mineral Resources Minister Purnomo Yusgiantoro.
"If (oil) prices keep falling and our (subsidy) calculation is sufficiently sound, it is my moral obligation to reduce the burden on our people," he said.
Analysts say a cut in fuel prices would drastically boost the popularity of the Yudhoyono administration just months ahead of the upcoming elections, especially among middle- and lower-income voters.
Indonesia has long maintained a hefty subsidy to keep fuel for motorists and households below international market prices.
Energy minister Purnomo said the government was unlikely to lower the cost of all type of fuels, because the subsidy for most of the fuel this year was expected to exceed the allocation, due to a spike in global oil prices earlier this year.
Ministry figures show subsidy spending reached Rp 130.9 trillion (US$13 billion) as of October, far higher than the initially allocated Rp 126.82 trillion for the entire year.
"I think the most feasible fuel to see a price cut immediately is Premium gasoline," Purnomo said.
Subsidized Premium currently retails at Rp 6,000 per liter, 9.4 percent lower than the non-subsidized price of Rp 6,622.
Purnomo said the non-subsidized price was equivalent to the market price under the Indonesian Crude Price (ICP) benchmark of US$70 per barrel on average. The ICP is currently at $73.50.
Purnomo said it was impossible to simultaneously lower the prices of diesel, kerosene and three-kilogram-canister LPG this year, because their price disparity with global prices were wider than that of Premium.
State oil and gas company PT Pertamina data shows the price for non-subsidized kerosene in Jakarta, sold to industry, reached Rp 7,629 per liter as of Oct. 15, while the subsidized price was set at Rp 2500 per liter.
The House of Representatives on Monday officially asked the government to cut fuel prices in the wake of a steep fall in global oil prices, in a move that could galvanize support for the current administration.
The House's Commission VII, which oversees energy and mineral resources affairs, said lower fuel prices would cushion the economy against the impact of a looming global economic recession.
