Industrial fuel, Pertamax prices to fall

Leony Aurora, The Jakarta Post, Jakarta

State oil and gas firm PT Pertamina plans to lower prices for oil-based fuels consumed by industry, as well as high-octane fuel, by between 5 percent and 10 percent in January as global oil prices decline.

The prices of fuel set by Mid Oil Platts Singapore, used by the company as a standard to determine local prices, had declined similarly, Pertamina's head of fuel division Achmad Faisal said on Tuesday.

"I don't know the exact figures, but the prices have definitely dropped between 5 percent and 10 percent," Faisal said.

Pertamina lowered prices for its high-octane Pertamax and Pertamax Plus by Rp 300 (3 U.S. cents) per liter to Rp 5,400 a liter and Rp 5,600 per liter respectively on Nov. 21.

National consumption of the premium-quality fuel has declined to around 500 kiloliters (kl) per day this year, much lower than last year's daily average consumption of 2,000 kl.

The drastic decrease was due particularly to the skyrocketing retail price of the two fuels, which increased from Rp 2,450 per liter of Pertamax to Rp 4,000 and from Rp 2,750 per liter of Pertamax Plus to Rp 4,200 last December.

Most fuel types for industry -- which have been paying actual market prices since July -- rose slightly in November. Kerosene is being sold at Rp 6,480 a liter, diesel fuel at Rp 6,170 a liter and gasoline at Rp 5,890 a liter.

After the government hiked fuel prices by an average of 126.6 percent in October, domestic consumption has continued to show a decline. This may mean that next year's total demand for fuel may decline to as low as 61 million kl from the previous estimate of 65 million kl, said Faisal.

"I think that the consumption of subsidized fuel will be lower than the 41.5 million kl quota," said Faisal, referring to the fuels that will receive subsidies as determined by the House of Representatives.

However, if the government decided to lower prices, as global prices declined, consumption might climb again, he added.

Industrial usage would stand at between 19.5 million kl and 25 million kl next year, said Faisal.

Forced to pay more expensive market prices for petroleum-based fuel, many industries were trying to cut usage by replacing it with cheaper fuel products like coal and gas, as well as conducting efficiency measures.

Pertamina has said that subsidized fuel consumption would reach only 55.6 million kl this year, lower than the set quota of 59.6 million kl, as the company required industries to pay market prices.