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Jakarta Post

Turning petro dollars back on: A game theory approach

  • Darmawan Prasodjo, Arcandra Tahar, and Erwinsyah Putra

Durham, North Carolina   /   Tue, October 4 2011   /  05:00 am

Oil and gas exploration is booming worldwide due to prices increasing to around US$100 a barrel. The revenue generated by this price is helping some, but for Indonesia’s dwindling oil sector and increasing domestic demand, oil subsidies are increasing by 35 percent, or roughly $15 billion.

Although Indonesia has worked hard to expand economic activity in other industries, petroleum still dominates how Indonesia makes money, so we must manage our affairs well in this area by implementing a results-oriented fiscal system. A comparative analysis of oil-exporting countries shows that Indonesia is lagging — production in mature fields is declining and there are increasing costs associated with extracting the oil.

It’s a problem many countries are experiencing. Yet, many of them are attracting sizable investments from major oil companies that have the expertise and financ...