Govt may cut domestic fuel prices if ICP drops
Govt may cut domestic fuel prices if ICP drops
Leony Aurora, The Jakarta Post/Jakarta
The government will lower domestic retail fuel prices if the
Indonesian Crude Price (ICP), which follows global oil prices,
declines to below the assumed level used in the 2006 state
budget, a minister has said.
Minister of Energy and Mineral Resources Purnomo Yusgiantoro
said during the ministry's Idul Fitri open house on Friday that
the government regularly monitors oil price movements.
"If oil prices fall to our assumed level or below our assumed
level, the price of fuel will go down," said Purnomo.
The assumption adopted in the 2006 state budget for the ICP --
an index that reflects the prices of several types of crude
produced in the country -- is US$57 per barrel.
According to Bloomberg data, the spot price for Minas crude
oil, which makes up the bulk of Indonesia's production, stood at
$46.43 per barrel on Friday. The price has come down from a high
point of $63.33 per barrel on Aug. 28, leaving the average for
the past three months at $55.45 per barrel.
Global oil prices are steadily declining with a warmer-than-
normal weather in the United States delaying the onset of peak
winter demand.
On Friday, crude oil for December fell as much as 87 U.S.
cents, or 1.5 percent, to $56.93 a barrel on the New York
Mercantile Exchange, the lowest level since July 21.
Brent crude for December settlement fell as much as 90 U.S.
cents to $54.78 a barrel in London on the ICE futures exchange,
the lowest price in five months and 20 percent lower than the
record $68.89 on Aug. 30.
The government raised fuel prices by an average of 126.6
percent on Oct. 1 in an attempt to rescue this year's state
budget from ballooning fuel subsidy spending. Inflation hit a six-year-
high of 17.89 percent for the year to October due to the price
hikes.
Purnomo said on Wednesday that the government would have to
make sure that the fuel subsidy allocations were sufficient for
next year before making any price adjustments.
The House of Representatives decided to earmark Rp 54 trillion
(US$5.4 billion) out of the 2006 state budget to subsidize 17.08
million kiloliters (kl) of premium gasoline, 14.5 million kl of
diesel and 10 million kl of kerosene.
The total subsidized fuel quota of 41.58 million kl for next
year is far lower than this year's 59.6 million kl as the
government now requires fuel for industrial uses to be purchased
at market prices.
To meet domestic fuel demand, Indonesia has to import some
400,000 barrels of crude and 300,000 barrels of refined fuel
products per day. These imports use global market prices as their
benchmarks.