Pertamina raises LPG prices

Pertamina raises LPG prices

JAKARTA (JP): State-owned oil company Pertamina has increased the prices of liquefied petroleum gas (LPG) and asphalt, prompting fears that the move will push this year's inflation rate higher than expected and force people to turn to substitute fuels, such as kerosene.

Pertamina announced here yesterday that it had increased the price of LPG -- widely used here for cooking -- by 33.3 percent to Rp 1,000 (44 U.S. cents) per kg as of Dec. 19.

As of Dec. 4, the company also increased the price of asphalt by about 15 percent to Rp 420,000 per metric ton.

Pertamina public relations officer Didi Sunarwinadi said that the company had to raise the prices because of increases in production costs over the past four years.

The company produces its asphalt from crude oil imported from the Middle East. The steady depreciation of the rupiah against the U.S. dollar had, as a consequence, pushed production costs up, Didi said.

Pertamina said the price of LPG had to be raised due to the higher freight charges imposed by chartered tankers.

Some observers criticized the move as contrary to the government's efforts to keep inflation in check.

"The price increase is unexpected. It has the potential to push up food prices and, as a result, cause higher inflation, since many households and restaurants use the gas for cooking," said Bachrawi Sanusi, an oil and gas analyst.

According Bachrawi, the increase is also likely to encourage people to return to using kerosene, which costs about Rp 550 per kg.

"This will result in a surge in the number of kerosene consumers, which is against the government's policy of diversifying the sources of energy used in this country," he said.

Head of the Indonesian Consumers Foundation, Zoemrotin K. Soesilo, said that Pertamina should have formally announced the price increase before it came into effect and that the retailers of the gas should not have raised their prices ahead of the announcement. "But, in fact, retailers had already increased their prices as of last week," she said.

Didi said Pertamina did not announce the price rises until yesterday in order to prevent speculation among dealers and retailers.

Pertamina's president, Faisal Abda'oe, said separately yesterday that the price increases would not push up the inflation rate, because Indonesian LPG consumers are still very small in number and are located mainly in the major cities. (13)