Deputy Speaker of People's Consultative Assembly Urges Government to Monitor Rising Crude Oil Prices
Jakarta — Eddy Soeparno, Deputy Speaker of Indonesia’s People’s Consultative Assembly (MPR), has urged the government to remain vigilant regarding rising crude oil prices in the wake of the week-long conflict between the United States and Israel against Iran.
Soeparno stated that crude oil prices are predicted to rise as a result of the ongoing conflict, but a very rapid and drastic increase will burden the state budget for an unpredictable period. Crude oil prices have surged more than 30 percent to reach USD 107 per barrel.
“The crude oil price assumed in the macro assumptions of the state budget is USD 70 per barrel, with a deficit of 2.68 percent of GDP. With crude oil prices above USD 100 per barrel, the possibility of the budget deficit could exceed 3.6 percent,” Soeparno said in Jakarta on Monday.
According to him, China, India, Japan, and South Korea — countries that rely heavily on energy supplies from the Middle East — will seek new alternatives to obtain oil and gas supplies, including from Nigeria, Angola, and Brazil, which are also energy suppliers to Indonesia.
As a result, Soeparno stated that Indonesia will have the opportunity to compete for crude oil supplies with major oil and gas importing nations.
On the other hand, the implications of rising crude oil prices for Indonesia are quite challenging given Indonesia’s crude oil requirement of one million barrels per day.
When crude oil prices rise significantly and the rupiah weakens against the US dollar, the burden of energy imports becomes increasingly heavy.
With the assumption that import volumes remain constant, foreign exchange requirements will currently increase to purchase energy products at higher prices and with a weaker rupiah exchange rate.
“We need to monitor disruptive conditions in the energy market not only from rising energy prices, but also from supply availability,” he said.
Nevertheless, Soeparno expressed confidence that the government has prepared alternative import sources from other countries, so that Indonesia can have adequate supply source diversification.
“What truly needs our attention is the extent to which the fiscal resilience of oil and gas importing countries is adequate to meet their energy needs as prices continue to climb for a prolonged period,” he said.