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Price of non-subsidized fuel could reach
Car owners in Indonesia will have to dig deeper into their pockets to buy gasoline next year as energy analysts around the globe predict that the global crude oil price may reach more than US$100 (Rp 904,000) per barrel, an expert says
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ar owners in Indonesia will have to dig deeper into their pockets to buy gasoline next year as energy analysts around the globe predict that the global crude oil price may reach more than US$100 (Rp 904,000) per barrel, an expert says.
ReforMiner Institute executive director Pri Agung Rakhmanto said the current increase in the global crude oil price due to the extreme winter in the United States and Europe as well as the reluctance of the Organization of Petroleum Exporting Countries (OPEC) to increase production would continue until next year.
“Analysts have projected that the price may hit $100 in the first quarter of 2011. If that happens, we estimate that the price of Pertamax [one of the non-subsidized fuels] may touch Rp 8,900 or Rp 9,000 per liter,” he said over the phone Monday.
Currently, the price of Pertamax at state oil and gas firm Pertamina’s fuel stations in Greater Jakarta is set at Rp 7,050 a liter. Last month, the price stood at around Rp 6,900.
For people who are used to buying subsidized gasoline at Rp 4,500 per liter, the rise in the crude price would almost double their fuel spending.
The government has the approval of the House of Representatives to implement a restriction on subsidized fuel sales starting April next year. Under the new policy, private car owners will be obliged to pay full price for fuel to help reduce the growing fuel subsidy spending.
The restriction, combined with surging prices, may bring several negative excesses like illegal hoarding that could crank up the prices even higher, Pri warned.
“An increased global oil price will also increase the burden on the state budget to subsidize gasoline, diesel and kerosene,” he said.
The 2011 state budget’s assumption on the average global oil price stands at $80.
With that calculation, the total fuel subsidy would top Rp 95.5 trillion next year, up from Rp 88 trillion in 2010 and from Rp 45 trillion in 2009. The 2011 subsidy figure was set before the government decided to restrict the sales of subsidized fuels. The new fuel policy would cut subsidized fuel sales by 1.74 million kiloliters (about 4.5 percent).
ReforMiner Institute calculates that the state has to add Rp 500 billion in subsidy for every $1 average price increase.
Pertamina spokesperson Mochammad Harun acknowledged that an increased global oil price would consequently cause an increase in the prices of non-subsidized fuels, which generally have higher octane content than subsidized fuels.
“We’ll pass it on to consumers. There’ll be no problem. It’s just a logical consequence that if the oil price increases, non-subsidized fuel prices will follow,” he said.
In 2008, when the global oil price hit about $140 per barrel, Pertamina set the prices of non-subsidized
fuels at between Rp 10,000 and Rp 12,000.
Harun suggested that people, including gas station owners, react calmly to analysts’ predictions. He said that experts could make projections, but in his experience, the global oil price was too unpredictable.
“They [analysts] can say whatever they want, but no one can predict the global oil price in the future,” he emphasized.
On Monday afternoon, the global oil price stood at $91.18 per barrel.
Energy and Mineral Resources Minister Darwin Zahedy Saleh said the government had anticipated the trend of climbing oil prices and was currently preparing strategies to minimize any negative impacts.
“We’re now conducting an in-depth study to minimize the impacts of increased global oil prices, including whether or not we can implement the restriction on subsidized fuel sales sooner,” he said.
Darwin added that a higher oil price would, of course, increase the burden of the state budget to subsidize fuels. He suggested that higher-income people buy non-subsidized fuels to ensure greater access to those who most need subsidized ones.
