Oil price hits $64, RI fails to reap profit
Urip Hudiono, The Jakarta Post, Jakarta
While other members of the Organization of Petroleum Exporting Countries have reaped windfall profits from skyrocketing global oil prices -- which hit US$64 a barrel on Tuesday -- Indonesia's heyday is long over now that the country imports more of the commodity than it exports.
Coordinating Minister for the Economy Aburizal Bakrie announced on Tuesday that domestic oil production was only 1.06 million barrels per day (mbpd) and would remain at that level until the end of the year.
Therefore, the country has to import 300,000 barrels of crude oil per day and 400,000 barrels of fuel products to meet surging domestic demand.
"We have become a net oil importer, and this will surely affect the condition of the state budget," he said.
The government has assumed oil production at 1.125 mbpd in the 2005 state budget, which was recently revised to reflect a more realistic oil price and rupiah exchange rate.
Although Indonesia's status as an exporter or importer is debatable as the country's oil trade balance alternates by the day, statistics tend to indicate it is an importer.
"On average, our days of being a net oil importer outweigh that of being a net oil exporter," Aburizal said.
His statement echoes that of Minister of Finance Jusuf Anwar, who said in the government's mid-term budgetary progress report to the House of Representatives last week that Indonesia's oil production averaged 1.019 mbpd and would likely only improve slightly to 1.075 mbpd by year-end.
Since 2002, Indonesia has failed to meet its output quota of 1.425 mbpd, prompting a review of its OPEC membership status.
Lower-than-expected production will pose more challenges for the government in managing the state budget deficit. Revenue from oil exports during the first half of the year only reached Rp 18.5 trillion (US$1.89 billion), less than a quarter of its Rp 85.6 trillion estimate, based on an average oil price of $45 a barrel and a rupiah exchange rate of Rp 9,300 to the dollar.
Meanwhile, the fuel subsidy, which the government disburses to state oil and gas firm PT Pertamina for oil imports, has guzzled Rp 40 trillion this year, more than half of its Rp 76.5 trillion full-year allocation, and is expected to reach Rp 112 trillion by the end of the year.
Pertamina's huge dollar demand for oil imports amid soaring oil prices, however, only adds to the central bank's fiscal headache in containing recurring volatility between the rupiah's exchange rate and inflation.
To deal with the problems, Aburizal said, the government has no other option but to improve the country's energy investment climate to boost oil production.
"In the worst-case scenario, the government may also have to reduce the fuel subsidy," he said.
The government cut the fuel subsidy in March, leading to an average 29 percent increase in domestic fuel prices. The money saved from the subsidy has been earmarked for assistance funds for low-income families amid the resulting surge in inflation.