Oil prices and the national budget

Oil prices and the national budget

The oil price assumption of US$24 per barrel in the 2005 state
budget draft has been widely criticized, as the world market
price of oil has already reached $50 per barrel. The high price
of oil on the international market, which could probably stay
like that for a long period, is likely to burden the Indonesian
economy in the coming months.

The high price stems from the conflict in Iraq, a rise in
China's crude oil imports, the high demand for oil in India and a
decrease in America's oil supply.

An fuel subsidy increase to Indonesia's state oil and gas
company, PT Pertamina, might disturb the economy. With the oil
price assumption at $24 per barrel, Pertamina will receive a
subsidy of 1 percent of the gross national product.

In this regard, why has the government not changed the
assumption in the 2005 state budget draft as it did in the 2004
state budget, where the oil price was set at $36 per barrel?

The government should thus be more active in energy
diversification and conservation, increase oil and gas production
and encourage energy efficiency.

In the name of energy conservation, the government should
consider the possibility of increasing the domestic price of oil
to adjust to the skyrocketing world market price of the
commodity.

Bisnis Indonesia believes that maintaining the oil price
assumption at $24 per barrel was done merely for political
reasons prior to the presidential election on Sept. 20. We also
believe that whoever is elected as the next president will
eventually be forced to increase the domestic price of oil.

Raising the domestic oil price is an unpopular decision, but
it is one risk the country's leader needs to face. On the other
hand, people should not be spoiled by the low fuel price policy,
but be taught about the hardships the country is facing.

-- Bisnis Indonesia, Jakarta