GOVT CONSIDERING LOWERING FUEL OIL PRICES

By Andi Abdussalam

Jakarta, Oct 27 (ANTARA) - When  crude prices in the world market were hovering at US$120 a barrel in  May this year, causing fear that it would push up fuel subsidy to more than Rp125 trillion, the government was prompted to raise domestic fuel oil prices by an average of 28.7 percent.

        The government raised the prices of premium gasoline from Rp4,500 to Rp6,000 per liter, diesel oil from Rp4,300 to Rp5,500 per liter and kerosene from Rp2,000 to Rp2,500 per liter.

         With the fuel oil price hikes, the government was said to be able to save up to Rp25.877 trillion in fuel oil subsidy from the state budget.

         Now that crude price in the world market has dropped to US$70 per barrel, Energy and Mineral Resources Minister Purnomo Yusgiantoro said his side would have a coordination meeting with the finance minister to discuss the downward trend of crude price in the world market.

         The point is that the government is considering to lower domestic fuel oil prices. The same opinion was also expressed by State Minister for National Development Planning/Chairman of National Development Planning Board (Bappenas) Paskah Suzetta.

         He said that the government is planning to lower fuel oil prices early next year in line with the down-ward trend in crude prices in the world market,
    "The government will hold a meeting with a number of ministers next week to discuss the plan to lower fuel oil prices," Suzetta said after attending the 44th anniversary celebration of Golkar Party here on Sunday.

         He said that the government should pay attention to two things before deciding to lower fuel oil prices, namely fuel oil subsidy and the fluctuating rupiah exchange rate against the US dollar.

         The minister said that although crude price in the world market had been going down, the government would continue its cash assistance (BLT) for the poor until next year.

         Minister Yusgiantoro said that whether or not  fuel oil prices needed to be lowered it must be discussed in a coordination meeting of the cabinet ministers.

         "The policy to raise or lower the prices of fuel oils is not the sole affair of the Ministry of Energy and Mineral Resources (ESDM). It needs coordination with the finance minister and other cabinet ministers and then report the result to the president," Yusgiantoro said.

         The minister was confident that if the decision is taken jointly it would serve the best interest of the people, and therefore the government will surely prepare a best decision.

           According to the minister, the technical departments and the ESDM now keep on monitoring the developments of fuel prices in order to study at what point the prices could be set, whether it would be set at the same levels as now for example,  premium gasoline at Rp6,000 per liter, diesel oil at Rp5,500 per liter and kerosene at Rp2,500 per liter.

          He said that the present prices were actually the same  as that of retail prices. The retail prices were equivalent to several US dollars per liter.        
     "We are calculating how much the exact price of the Indonesian Crude Price (ICP) and how much subsidy is still needed. Our idea is that there would be no longer a subsidy. This is our first idea," he said.

          Yusgiantoro said that the second thing is that the government was taking into account when the prices were lowered but it turned out later that fuel oil prices rebounded, the consequence was that the prices would go up  again.

          "The prices would be raised again, though it would unlikely be the same as the present level," he added.

         That's why in the near future, the relevant ministers will hold a coordination meeting to see whether the prices will also be raised if the price of   crude price in the world market increased. The technical department is still discussing it before it was taken to a cabinet ministers' meeting.

          Yusgiantoro said that the government was also studying the implications that would arise if the fuel oil prices reduced. "The logic is that the subsidy will decline if the fuel oil prices also decrease," the minister added.

         However, the minister reminded that the state income from this sector would also drop while revenues from the ESDM accounted for 35 percent, of which oil and gas contributed some 25 to 30 percent.

         He said that based on his office monitoring, when OPEC cut its production by 1.5 million barrels per day it was expected that the price would rise to US$80 per barrel but it seemed that the price did not increase but adversely still went down.

         "That's why we are still waiting for the market response.   This is because the price of oil is difficult to predict," the minister said.

         However, the minister said he was convinced the government would come up later with a decision, which was not made by the ESDM alone but the government one.

(T.A014/A/HNG/a014)  27-10-2008 01:00:30