Govt to revise oil price assumption
Govt to revise oil price assumption
Urip Hudiono, The Jakarta Post, Jakarta
Only two days after delivering the 2006 state budget draft before
the House of Representatives, the government has admitted that
its US$40-per-barrel oil price assumption was "unrealistic".
"Yes, (it is unrealistic). We are open to the possibility that
the oil price assumption will be revised accordingly to the
latest situation," head of the Ministry of Finance's Economic,
Financial and International Collaboration Studies Agency, Anggito
Abimanyu, said on Thursday.
At Tuesday's presentation, President Susilo Bambang Yudhoyono
acknowledged that the oil price assumption might "be incompatible
with the current oil price that tends to be very high and may
well be revised in deliberations with the House."
Anggito argued that the government did not solely base the oil
price assumption on current prices -- which hit the $67 barrier
recently -- but also on fiscal prudentiality of the state budget.
He said it would be better to put the oil price at its current
low assumption and then revise it upwards later on. He added it
would be easier to do so than having to cut already disbursed
budget allocations resulting from a too high oil price
assumption.
"We do not want to put the assumption at, say, $60 a barrel,
but then end up with oil price averaging at only $53 or $55," he
said.
"It will be more difficult to retract the allocations."
The government has earmarked Rp 88.6 trillion (US$8.9 billion)
as oil export revenues in the budget draft and Rp 49.3 trillion
as revenue sharing to the oil producing regions.
Anggito said the finance ministry would likely propose to the
House a revision of the oil price assumption at $45 a barrel.
Minister of Energy and Mineral Resources Purnomo Yusgiantoro
said earlier the oil price assumption was based on the Indonesian
Crude Price, that currently averages between $50 and $55 a
barrel, and will likely average between $40 and $45 next year.
Separately, economist from the Institute for the Development
of Economics and Finance (Indef), Fadhil Hasan, suggested that
the assumption should have ranged between $50 and $60 per barrel.
"The $40-a-barrel assumption contradicts the real condition.
Local and international research agencies have predicted that
global oil prices next year will not decline to an average of $40
per barrel," he said in a media briefing.
"The world's economy will not slow down next year. And oil
demand will remain high as economic growth in India and China is
estimated to reach 8 percent," he said.
Fadhil was surprised at President Susilo's state of the nation
address that did not mention the government's plan to lift the
fuel subsidy.
"If oil price remains at $60 per barrel and the country's oil
production reaches 1.1 million barrel a day, the fuel subsidy
next year is projected at Rp 123 trillion.
"But the budget draft only allocates Rp 68.5 trillion for the
subsidy. What will the government do to address this problem?" he
questioned, adding that domestic oil consumption would grow by 5
percent next year. (006)