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