Oil price hike vs reserves

Oil price hike vs reserves

From Koran Tempo

Minister of Finance Boediono has said the net impact of the current oil price increase on the fiscal situation is still under control, and it will not be followed by a fuel price hike because the government has a buffer stock to ensure security of supply.

In fact, the crude oil price has reached US$44 a barrel -- $10 higher than the average figure forecast in the state budget, that is to say, an increase of 29 percent.

With a lack of spare supply capacity as stated by the Organization of Petroleum Exporting Countries, high demand resulting from China's rapid economic growth, political tension in oil producing areas and bottlenecks in refineries, high prices look set to persist.

It is therefore illogical to say that our oil stocks are still sufficient to supply domestic demand. The finance minister must be aware that oil prices will continue to rise as the market is responding to the shortage by raising prices.

The minister has failed to recognize out that it is now the time for the government to review fuel prices, apparently because to so the political interests of a certain presidential candidate might be harmed.

An official explanation is needed about how subsidies will be provided over a fairly long period while the actual price is 29 percent higher than the budget average forecast, how big our domestic stocks really are and how the subsidies will affect other vital programs.

It would be wiser and more professional for the minister to say that fuel price increases are reasonable and very likely to happen given the current situation, as has been the case in other countries.

SOCRATES RUDY Jakarta