Despite soaring subsidy, fuel price hike ruled out

The Jakarta Post, Jakarta

Despite the fuel subsidy threatening to reach a staggering Rp 90 trillion (about US$9.5 billion) this year because of high global oil prices, the government has promised no more domestic fuel price increases.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro told legislators on Thursday night during a hearing that, should global oil prices stay at their current levels, the fuel subsidy could hit Rp 90 trillion -- more than twice the initial estimate.

"That figure is arrived at assuming oil prices between US$42.90 and $48.90 a barrel through the end of this year," Purnomo said, adding that oil prices have average about $50 a barrel from January to April.

In the revision to the 2005 state budget, the government put the fuel subsidy at Rp 39.1 trillion, assuming an average oil price of $35 a barrel.

However, Coordinating Minister for the Economy Aburizal Bakrie ruled out on Friday the possibility of further domestic fuel prices this year.

"No, there will not be another fuel price increase," he said.

The government raised fuel prices by an average of 29 percent in March.

"We can still cope without having (to raise fuel prices), such as by increasing tax revenue," Aburizal said.

Mulia P. Nasution, director general for the treasury at the Ministry of Finance, echoed Aburizal.

"From a (budget) financing point of view, everything is quite safe because a surge in oil prices also mean an increase in (oil export) revenue for us," said Mulia.

The country sold 90.8 million barrels of crude oil and condensate from December through February, or an average of 1.009 million barrels a day, according to Bloomberg, less than the target of 1.12 million barrels a day set in the budget.

However, the country also imports oil -- both crude and refined -- to meet the domestic fuel demand.

The House of Representatives will begin deliberating the revised 2005 state budget next week.