Fuel price increase: No escape from reality<\/p>\n
Endy M. Bayuni, The Jakarta Post, Jakarta<\/p>\n
Indonesia finally got in step with the rest of the world, which
\nhas been trying to deal with the reality of extremely high oil
\nprices. The hike in domestic fuel prices last week, averaging 29
\npercent, had to happen sooner or later given that world prices
\nhave more than doubled in the 14 months since they were raised
\nlast.<\/p>\n
Most people in the world, including some countries much poorer
\nthan Indonesia, have already had to make the painful adjustments
\nto this new reality. In India, for example where per capita
\nincome is lower, motorists pay close to the equivalent of US$1
\nfor a liter of gasoline, including an excise tax.<\/p>\n
The adjustment for Indonesians was always going to be that
\nmuch harder, because the government decided to pass on the
\nincrease to the gas stations in one lump, whereas most other
\ncountries reviewed their domestic fuel prices incrementally as
\nworld oil prices jumped from day to day, week to week, and month
\nto month over the past year.<\/p>\n
World oil prices were hovering at around $24 a barrel at the
\nstart of 2004, but ended the year around $50. This week, when
\nIndonesia decided to increase the domestic fuel prices after
\nmanaging to hold on to them for 14 months, world oil prices
\nreached $53.<\/p>\n
The Rp 2,400 (about 26 US cents) a liter people now pay at gas
\nstations for premium (regular) gasoline only takes us to the \"$35
\na barrel\" reality, meaning that there is still a huge subsidy
\ncomponent in each liter we burn.<\/p>\n
Essentially, we are only half the way to the real market
\nprice. But even that is bad enough for most people.<\/p>\n
Indonesians have ex-president Megawati Soekarnoputri to thank
\nfor (or curse), for shielding the people from the vagaries of the
\nvolatile world oil markets. Facing an election later in the year,
\nMegawati decided early on in 2004 that it was too risky, for her
\nown political survival, to increase domestic fuel prices. So she
\npostponed the tough decision, but lost the election anyway.<\/p>\n
What an ungrateful lot Indonesians turned out to be when they
\ndid not return her to office. Instead, the voters opted for one
\nof her lieutenants, former chief security minister Gen. (ret.)
\nSusilo Bambang Yudhoyono. And so it was left to him to do the
\nunpopular thing, and still, he took five months to work up the
\ncourage to do it.<\/p>\n
Nobody said it would be easy to live with high world oil
\nprices. I addition to the immediate impact on transportation
\ncosts, the hikes will be felt by the rest of the economy, as
\nproducers and distributors pass on the increase to the consumer.<\/p>\n
So the nation must brace for even more bad news ahead.<\/p>\n
But if the experience of the rest of the world, and of
\ncountries poorer than Indonesia, in coping with higher oil prices
\nis any indication, the increase in domestic fuel prices last week
\ndoes not mean the end of the world either -- as many who oppose
\nthe increase would have us believe.<\/p>\n
Clearly, everyone, without exception, will be affected by the
\nincrease. Some will feel it more than others. The poor,
\nparticularly, are most vulnerable to general increases in prices,
\nthough not necessarily to higher fuel prices.<\/p>\n
Even if the government succeeds in shielding the poorest 17
\npercent of Indonesians by providing them with other subsidies,
\nthat will still leave the bulk of the population with higher
\nprices for many basic items.<\/p>\n
These are the people, (between the 17 percent poorest and 30
\npercent wealthiest) who are not poor enough to qualify for
\ngovernment assistance, but not wealthy enough to be able to
\neasily afford all the increases in prices without making huge
\nsacrifices. These are usually urban people with low, fixed
\nincomes working in factories, construction sites or in offices --
\nincluding low-level civil servants.<\/p>\n
And they are likely to be hardest hit from the direct impact
\nof higher fuel prices because they have to commute to work, and
\nbudget for food and other goods, which will surely see a price
\nhike.<\/p>\n
Sacrifices are therefore inevitable.<\/p>\n
Coordinating Minister for the Economy Aburizal Bakrie, when
\nannouncing the increase on Monday night, used the word
\n\"sacrifice\" twice. Sadly, neither he nor any of the government
\nofficials followed up on this gesture or bothered to explain what
\nwas meant exactly.<\/p>\n
Whenever leaders appeal for sacrifices, the most effective way
\nfor people to actually accept it, is to give details about what
\nsacrifices they themselves are making. One appeals by setting an
\nexample, not by telling others to sacrifice, then continuing to
\nlive an extravagant lifestyle. Soeharto, for all his faults, at
\nleast told his officials to tighten their belts and set an
\nexample.<\/p>\n
What we see today is the contrary, with officials and elected
\nleaders awarding themselves hefty salary hikes at a time when
\nmost of the people that voted for them are asked to make
\nsacrifices.<\/p>\n
Still, anyone seriously opposing the government's decision to
\nincrease fuel prices is simply denying the reality that we no
\nlonger live in the era of $24-a-barrel oil.<\/p>\n
He or she is also denying the reality that Indonesia is no
\nlonger loaded with oil the way we used to be back in the 1970s
\nand 1980s. Those days are over.<\/p>\n
If anything, the chief lesson of the 1970s and 1980s was that
\nwe squandered the massive amount of petrodollars through
\ncorruption and building unnecessary, white-elephant projects, and
\nleft the nation largely impoverished and almost bankrupt by the
\nend of the corrupt Soeharto regime.<\/p>\n
Today, we have to buy many of our oil needs from outside, and
\nwe are no longer awash with petrodollars. And yet corruption is
\nstill very much with us, just as it was during the heyday of the
\noil economy.<\/p>\n
And the fact that corruption is still out of control is
\nprobably the one reality that is much harder to digest for most
\npeople here, whether you support or oppose the fuel price
\nincreases.<\/p>\n
The writer is the chief editor of The Jakarta Post.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/fuel-price-increase-no-escape-from-reality-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }