By Andi Abdussalam
Jakarta, Dec 6 (ANTARA) - Amid calls for domestic fuel oil price cuts, the government is now considering the lowering next month of diesel oil and premium gasoline prices as part of its efforts to alleviate the people's burden and to stimulate the economy.
"We are still conducting an 'exercise' and making calculations to see if it is possible to again lower the price of premium or even diesel oil to reduce the industry's burden," President Susilo Bambang Yudhoyono said over the weekend.
The government cut subsidized premium gasoline by Rp500 to Rp5,500 per liter on December 1, and announced it was considering also to lower in January the price of diesel oil which was much consumed by industries and fishermen.
President Yudhoyono said after a meeting to evaluate the performance of the people's business credit scheme (KUR) at the Bank Rakyat Indonesia (BRI) building here on Friday that the finance minister, along with other ministers concerned was now making the calculations for a further reduction in the premium gasoline price.
Last Monday, the president said the government's intention to consider the possibility of lowering the diesel oil price was part of its efforts to alleviate the people's economic burden. "But the government must also take into account the state's financial capability," he added.
The government last month decided to cut the price of subsidized premium gasoline by Rp500 from Rp6,000 per liter effective December 1, 2008, but maintained the price of diesel oil.
House of Representatives (DPR) Speaker Agung Laksono when opening the House's Second Sitting last November 24, 2008, called on the government to consider lowering the price of diesel oil.
The House leader said the government's decision to lower the price of subsidized premium gasoline by Rp500 was a positive step but urged a recalculation of the Rp500 cut in the premium gasoline price because the world oil price was continuing to drop.
According to legislator Alvin Lie, the government should further lower the price of subsidized premium gasoline in January 2009 in accordance with the decline in the world crude price.
"With the world crude price at a range of about US$40 per barrel, the domestic price of subsidized premium gasoline should be lowered again next month," Alvin Lie of the House of Representatives (DPR)'s Commission VII (energy affairs), said.
He said the world crude price was now back to its level in the middle of 2005. "If the present price of crude holds or even drops further, the premium gasoline price at home could be returned to the level set before the October 2005 price hike," he added.
In response to calls by the House and the public, the government at the weekend said it was considering lowering the price of premium gasoline again, but added calculations should be made first.
According to the president, the government's move followed the continuing decline in the price of the world's crude oil. On December 4, 2008 the world's crude oil price was recorded at below US$44 per barrel.
The price of crude oil continued to decrease in the past four days in reaction to worsening global economic conditions and lower oil demand.
When announcing the decision to cut the price of gasoline by Rp500 effective on December 1, 2008 Finance Minister Sri Mulyani said the government would review its decision on the price of fuel oils every month to see if it was in line with developments in the world crude price.
Besides the price of premium gasoline, the government is also considering cutting the price of diesel oil. Energy and Mineral Resources Minister Purnomo Yusgiantoro said the government was studying the possibility of lowering the domestic diesel oil price.
According to House Speaker Agung Laksono, a cut in the diesel oil price would be good for low-income people and support their economic activities because diesel oil was widely used in public transportation and by fishermen.
Yet, the government had not fixed the amount of the reduction.
"To fix the amount of the reduction, the government will adjust it with the Indonesian Crude Price (ICP), the rate of exchange and tax component namely value added tax (PPN) and motor vehicles oil tax (PBBKB)," Minister Yusgiantoro said.
"We are not saying the diesel oil price will be reduced by Rp500-Rp1,000 per liter but we have to see if the price cut can be bigger. Anyway, there will be no problem if it is either smaller or bigger," he said.
The government would continue to evaluate the prices of premium gasoline, diesel oil, and kerosene. The premium gasoline price was reduced on December 1 from Rp6,000 to Rp5,500 per liter, but the diesel oil price is still being evaluated.
Last May, the government raised the premium gasoline price from Rp4,500 to Rp6,000 per liter but starting from December 1, 2008 it was reduced from Rp6,000 to Rp5,500 per liter.
A number or parties have said the cut in the premium gasoline price should be immediately followed by a diesel oil price cut on January 1, 2009 by around Rp500 or Rp300 per liter.
Following the Rp500 cut in the premium gasoline price on Monday, December 1, the Down-stream Oil and Gas Regulating Body (BPH Migas) predicted subsidized premium gasoline consumption in the country would increase by about 1-5 percent. (T.A014/A/HAJM/A/S012) 06-12-2008 22:30:40
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