Government unsure of fuel prices adjustment next year

Leony Aurora and Rendi A. Witular, The Jakarta Post, Jakarta

While global oil prices are on the decline, the government remains unsure of whether to readjust fuel prices next year, depending on whether the declining trend of oil prices is here to stay.

That would then determine whether the earmarked fuel subsidy for next year -- set at Rp 54 trillion (US$5.4 billion) -- would be enough or not, Minister of Energy and Mineral Resources Purnomo Yusgiantoro said on Wednesday.

"The government is trying to ensure that the subsidy will be enough for next year. We cannot decide whether to lower fuel prices amid the declining trend in global oil prices," said Purnomo at the presidential palace on Wednesday.

The subsidy is based on an oil price assumption of US$57 a barrel.

After hovering above $60 a barrel for months, global oil prices are now below $60.

On Wednesday, New York's main contract, light sweet crude for delivery in December, eased 8 U.S. cents to $59.63 per barrel in electronic dealing, as reported by AFP. In London, the price of Brent North Sea crude for December delivery fell 29 U.S. cents to $57.52 per barrel.

This year, subsidizing fuel is estimated to cost the government over $7 billion, with local demand estimated at more than 65 million kiloliters.

The government raised domestic fuel prices by an average of 126.6 percent in October in an attempt to save the state budget from the ballooning fuel subsidy.

Meanwhile, state oil and gas firm PT Pertamina says that the average daily consumption in the first eight days in November dropped significantly as factories stopped production nearing the Idul Fitri holiday, which fell on Nov. 3 and Nov. 4 this year, and fewer people traveled to their hometowns due to the recent fuel price hike.

Pertamina's head of fuel division Achmad Faisal said that the average daily offtake of premium gasoline this month thus far stood at 49,200 kiloliters (kl), kerosene 13,352 kl and diesel fuel 63,192 kl, making the total 125,744 kl.

"The average daily consumption in October was 157,346 kl, less than September's 174,622 kl," said Faisal.

"We can't tell yet whether this declining trend will continue," he said. "Hopefully it will."

Due to lower consumption and as the country's refineries return to full swing after two of them were shut down for maintenance last month, Pertamina will import less fuel than expected this month.

In November, the state firm will import 11.6 million barrels of fuel products, comprising 3.2 million barrels of premium gasoline, 1.2 million barrels of kerosene and 7.2 million barrels of diesel fuel.

Pertamina previously estimated that it would need to import 14 million barrels of fuel this month, down from 17 million barrels in October.