Oil prices high, worries loom in RI
Oil prices high, worries loom in RI
The Jakarta Post, Jakarta
Oil prices remained high on Thursday but fell from record
peaks, reviving fears over a ballooning fuel subsidy and widening
state budget deficit.
Reuters reported that oil prices fell after Russia's justice
ministry said it was not seeking to halt production by oil giant
Yukos.
U.S. light crude lost 40 U.S. cents to $42.50 a barrel in
early trading after climbing to a peak of $43.05 on Wednesday,
the highest in the contract's 21-year history.
In London, Brent crude oil fell 33 cents to $39.20 after
scaling a 14-year high of $39.68 the day before.
Wednesday's price peaks were driven by concerns about possible
supply disruption from Yukos, which pumps a fifth of Russia's oil
and faces bankruptcy as courts try to enforce the payment of a
$3.4 billion tax debt.
But on Thursday a justice ministry spokesman said bailiffs,
who had served writs barring property sales by the company's
operating units, were not seeking to halt oil production.
Analysts generally predict any disruption will be minimal.
"Although Yukos' management has warned that intensifying
pressure may have a negative impact on production due to its
inability to finance exports, this appears to be a plea for
sympathy rather than a real concern," consultancy Energy Security
Analysis said in a note.
As a consequence of the rise in oil prices, Indonesia will
face a ballooning fuel subsidy as domestic oil output has been
declining and oil imports are on the increase.
The Ministry of Finance has said that a $1 increase in the oil
price compared to the state budget's price assumption would add a
deficit to the state budget of between Rp 700 billion and Rp 800
billion.
The 2004 state budget assumes an oil price at $22 a barrel
while the fuel subsidy is set at Rp 14.5 trillion. Despite rising
oil prices, the government has decided not to raise fuel prices
in this election year to avoid social and political unrest.
Governmental officials have projected that the fuel subsidy
could jump to Rp 56.90 trillion this year if the oil price
averages $35 a barrel throughout the year. It will also inflate
the state budget's deficit by around Rp 1.9 trillion.
For this year, the deficit is targeted at 1.2 percent of gross
domestic product (GDP) or Rp 24.4 trillion.
High oil prices will also raise state oil and gas company
Pertamina's cost of importing fuel and worsen the cash flow
problems currently faced by Pertamina. This could in turn disrupt
the provision of fuel by Pertamina on the domestic market as the
government's subsidy is insufficient to cover Pertamina's rising
costs.
Pertamina spokesman Hanung Budya Yukyanta said on Thursday
that the government had disbursed Rp 2.38 trillion out of the Rp
5.1 trillion fuel subsidy for June.
"The disbursement of the remaining Rp 2.8 trillion will be
discussed between the government and Pertamina this week," Hanung
said.
National fuel stocks have dropped to a critical level of 21
days in the past few weeks as a result of Pertamina's cash flow
problems.