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