Fuel for the fire
Fuel for the fire
From Republika
The factor of "domestic market obligation" (DMO) has never been quoted in the opinions, both for and against, on the recent increase in fuel prices. About 95 percent of the 1.5 million barrels of Indonesia's oil output per day is produced by foreign oil companies which operate in Indonesia based on a production sharing contract.
The contract stipulates that the DMO -- i.e. the obligation of oil companies to deliver a certain quantity of oil to the government at a price of 10 percent of the market price after production -- has been going on for more than five years. Until the mid 1980s, the price was only 20 U.S. cents per barrel. This stipulation is meant to guarantee domestic requirement. It is in accordance with the 1945 Constitution that natural wealth should benefit the people's welfare to a maximum degree.
The Minister of Mines and Energy always calculates the fuel price based on the market price of crude, never on the DMO price. Thus, the fuel price becomes very high. Additionally the related agencies in charge are very inefficient. The DMO price was once increased from US$0.20 to 10 percent of the price of crude per barrel. It means that the price of crude of US$15 per barrel was increased 7.5 times. If this price could be raised drastically, why could the DMO volume not be increased -- e.g. two or three times - if need be?
When the DMO price was increased, the (foreign) oil companies (generally very rich) remained silent, because they benefited from it. I am convinced that they will "scream" if the DMO volume is raised in the Indonesian people's interest. If we want to take the side of the man on the street, the measure must be taken. It is better to make the foreign oil companies shout or cry than to make a victim of the people, who may have lost all energy to scream or cry.
I still trust that the minister of mines and energy and other decision-makers will take the side of the people who are only trying to obtain what is their right.
TATANG R. JIWAPRAJA
Jakarta