Increase in oil prices may prompt smuggling

Increase in oil prices may prompt smuggling

The Jakarta Post, Jakarta/Batam/Surabaya/Kupang

State oil and gas company Pertamina has warned of a possible rise
in the smuggling of fuel out of the country as the recent
increase in oil prices has widened the price gap between fuel
sold domestically and in neighboring countries.

"The price gap has widened so smuggling activities could be on
the rise if fuel prices in the country are not increased,"
Rachmat Dradjat, deputy director for fuel products marketing at
Pertamina told The Jakarta Post recently.

The fuel is mostly smuggled to neighboring countries such as
Singapore, Malaysia and East Timor, while the type of fuel most
prone to smuggling is kerosene, automotive diesel fuel and
premium gasoline, according to Rachmat.

Fuel costs are cheaper in Indonesia than those countries due
to the government's subsidy.

"We can detect smuggling activities from an unusual rise in
demand for oil-based products in certain areas," Rachmat said.

East Nusa Tenggara Police chief Brigadier Gen. Edward
Aritonang confirmed that smuggling basic commodities including
fuel products to East Timor has been increasing.

Fuel smuggling is particularly prompted by the high fuel
prices in East Timor which reaches the equivalent of about Rp
10,000 a liter (US$1.075) compared to an average of Rp 2,000 (21
U.S. cents) per liter in the western part of Timor island.

"If fuel smuggling continues, there could be fuel shortages on
Indonesian side of Timor island," Edward said.

According to Edward, the smuggling involved residents living
along border with East Timor, but the Indonesian and East Timor
police had stepped up efforts to curb it.

However, Pertamina's Marketing Division V which oversees fuel
distribution in East Java, Bali, East Nusa Tenggara (NTT) and
West Nusa Tenggara (NTB) said there had been no fuel shortages in
the provinces.

"Demand for oil-based products for both industry and consumers
in the three provinces has remained relatively stable in the
first semester of this year compared to 2003," Asep Aonuddien,
spokesman for Pertamina Marketing Division V, told the Post
recently.

In Batam, which shares sea borders with Singapore, Pertamina
also reported no fuel shortages.

"Fuel supplies for industry and household use have been
running normal," Irto Petrus Ginting, spokesman for Pertamina's
Batam marketing unit, told the Post.