Government likely to budget for $35 oil price in 2005
Government likely to budget for $35 oil price in 2005
Dadan Wijaksana, The Jakarta Post/Jakarta
The government, which is looking at ways to gradually scrap fuel
subsidies next year, said on Thursday it would likely revise
upward its assumption of average oil prices for 2005 -- from
US$24 to US$35 a barrel.
The government uses the estimate to set the budget for the
fuel subsidy each year.
Minister of Energy and Mineral Resources Purnomo Yusgiantoro
revealed the figure during a hearing with lawmakers, saying that
the revision was needed to better reflect the movement of global
oil prices.
"The revision would, of course, increase the fuel subsidy,
should we intend to maintain the existing policy. That's why
we're here, to discuss options to gradually lift subsidies on
fuel," Purnomo said.
Based on the new price, fuel subsidies -- if retained -- would
reach Rp 53.4 trillion, compared with the initial price estimate
of Rp 19 trillion, he said.
"But we want to air alternative schemes with legislators so
that we can reduce this subsidy as cause as little impact as
possible," Purnomo said.
On Tuesday, Vice President Jusuf Kalla said a reduction in the
subsidy would result in a hike of up to 40 percent in domestic
fuel prices.
Oil prices eased on Thursday with U.S. crude oil futures
falling a dollar to $44.48, while London Brent was down 96 U.S.
cents at $41.35.
The fuel subsidy for this year is estimated to reach a
whopping Rp 59.2 trillion on the back of record high global oil
prices, against an initial projection of Rp 14.5 trillion.
The latest finance ministry data showed that the fuel subsidy
had cost the government more than Rp 46 trillion as of Nov. 23.
Purnomo did not rule out such an increase but said there were
many ways being considered to reduce the subsidy.
"Not to mention that we still have to meet with legislators
for approval," he said.
One option proposed by the ministry was the government lift
the subsidies only industrial diesel oil, premium gasoline and
bunker oil but retain subsidies on kerosene and automotive diesel
oil, which would result in a subsidy reduction of up to Rp 25
trillion.
The elimination of subsidies for industrial diesel oil and
bunker oil alone would cut the total fuel subsidy to Rp 36
trillion from Rp 53 trillion, Purnomo said.
Since President Susilo Bambang Yudhoyono assumed office in
October, the government has pledged to replace the subsidy it
with a more targeted scheme.
The subsidy is enjoyed largely by the middle and upper income
groups and lax border controls mean the cheap fuel is also
smuggled overseas.
The government has said it could use the money it spends on
the subsidy, on education, health care, and other facilities for
the nation's 70 million poor people.