Govt sees limited oil-hike impact<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The government indicated on Wednesday it can still afford to
\nkeep domestic fuel prices at current levels without harming the
\nstate budget despite soaring oil prices in the international
\nmarket.<\/p>\n
Oil prices rose to fresh record highs of US$44.28 per barrel
\nin New York and $40.82 in London during the day amid supply
\nconcerns, shattering global financial markets.<\/p>\n
But Minister of Finance Boediono asserted that the net impact
\nof the high oil prices on the state budget was still
\n\"controllable\".<\/p>\n
\"We don't need to worry about its impact on the state budget.
\nIt can still be controlled,\" Boediono was quoted by Antara as
\nsaying on the sidelines of a seminar on fiscal policy at the
\nUniversity of Indonesia in Depok, West Java.<\/p>\n
Boediono did not provide details on how the state budget would
\ncope with it, but he said that the government would also do its
\nutmost to secure the domestic fuel supply.<\/p>\n
Since the price of fuel has been a sensitive issue in the
\ncountry, Boediono's remarks should not be much of a surprise
\nespecially as the country is now preparing for the runoff of the
\npresidential election.<\/p>\n
Although the country is a member of the Organization of
\nPetroleum Exporting Countries (OPEC), Indonesia also imports
\ncrude to meet domestic demand amid declining reserves.<\/p>\n
The rise in international oil prices will also have a negative
\nimpact on the state budget as the government still subsidizes
\nseveral types of fuel particularly those used by the
\ntransportation sector and low-income households. The current
\nstate budget assumes an average oil price of $22 per barrel, but
\nMinister of Mineral Resources and Energy Purnomo Yusgiantoro said
\nrecently that the average oil price during the past year stood at
\naround $34 per barrel. This could inflate the fuel subsidy this
\nyear to around Rp 50 trillion ($5.42 billion), more than triple
\nthe Rp 14.5 trillion allocated in the current budget.<\/p>\n
The government will present a revised version of the current
\nstate budget to accommodate the oil price change after President
\nMegawati Soekarnoputri delivers her Independence Day speech on
\nAug. 16.<\/p>\n
Despite his assurance, Boediono warned there would be a limit
\nin the ability of the future budget to deal with the subsidy
\npressure, saying the next government should respond to any oil
\nprice hike in the future. The remark suggests the new government
\nwill have to up domestic fuel prices next year if the
\ninternational oil price increases to avoid a fiscal fiasco.<\/p>\n
Some economists have long criticized the costly government
\nfuel subsidy as it only benefits the rich people with cars and
\ninefficient companies, and also encourages smugglers to sell
\nsubsidized fuel to neighboring countries.<\/p>\n
Elsewhere, the high-flying oil prices proved to have battered
\nworld stock markets. In Tokyo the Nikkei-225 share index lost
\n1.17 percent to 11,010.02 points, following in the footsteps of
\nWall Street a day earlier.<\/p>\n
European stock markets followed suit. The British FTSE 100
\nindex dropped 1.04 percent to 4,383.50 points in early afternoon
\ntrading, with the German DAX 30 sliding 1.67 percent to 3,812.49
\npoints.<\/p>\n
In Jakarta, the rupiah sharply declined to Rp 9,225 per dollar
\non Wednesday, from Rp 9,180 on Tuesday on suspected heavy dollar
\npurchase by Pertamina to finance the fuel import transactions.<\/p>\n
Among the reasons that helped lead to the oil price surge, was
\nTuesday's remarks by OPEC president Purnomo Yusgiantoro, who said
\nthat the cartel had run out of on-hand stocks to help boost
\nglobal supply which could otherwise ease the prices.<\/p>\n
Supply disruptions also pose a threat.<\/p>\n
\"...The supply chain is tight and there is little room for
\ndisruption -- hence the concerns over troubles at Russian oil
\ncompany Yukos,\" an analyst from Standard Chartered was quoted as
\nsaying by AFP.<\/p>",
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"sponsor": "Okusi Associates",
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