Work needed to solve fuel crisis

Work needed to solve fuel crisis

Leony Aurora, The Jakarta Post, Jakarta

Whenever a country faces a problem, it is always easy to point
the finger of blame at the government.

This is true with the current fuel fiasco here. But is the
government really to blame for long queues at gas stations and
the ballooning fuel subsidy?

President Susilo Bambang Yudhoyono has conveniently pointed to
soaring global oil prices, now hovering at US$61 per barrel.

Granted, the jump in oil prices took people by surprise and,
as one analyst said, was "beyond the government's anticipation".

However, when the Cabinet says rising domestic demand is
another important factor in the fuel shortages and the rising
fuel subsidy, another question is raised: is rising demand also
"beyond anticipation"?

It is expected that some 550,000 new cars will hit the
country's streets this year, a 14 percent increase from last
year. This does not include the number of new motorcycles that
will be sold this year, estimated at five million, higher than
last year's 4.3 million.

The country's GDP growth was 5.1 percent last year and is
projected to reach 6 percent this year. As any economist will
testify, a rising economy translates into rising energy
consumption.

Despite such facts, the 2005 state budget set the total quota
for subsidized fuel -- premium gasoline, diesel fuel and kerosene
-- at 59.69 million kiloliters (kl), lower than the 62.34 million
kl of subsidized fuel consumed in 2004.

The lower quota was set, supposedly, to encourage energy
conservation and to try and keep down the subsidy. Unfortunately,
no specific programs were designed to achieve the first
objective, which caused the second to fail miserably.

Was it really a surprise that by May the domestic use of
premium gasoline was already 10.8 percent higher than the quota?

To add to the problem, state oil and gas firm PT Pertamina has
experienced cash flow snags in funding fuel imports since as
early as March. Out of fear the government would not cover the
subsidy for overquota fuel, the company took the initiative to
lower supply and "force" consumers to cut usage.

Fuel became scarce in many parts of the country. Even in
Jakarta, several gas stations posted "no premium" signs.

The ever populist President ordered Pertamina to let the fuel
pour and worry about the subsidy later. The effect was apparent
-- it may have taken some time, but eventually the fuel shortages
subsided.

The longer term effect, however, will be far more troublesome.
With current oil prices and a fuel overquota of 10 percent, the
fuel subsidy this year could double to Rp 150 trillion -- a
quarter of the state budget -- from the previous target of Rp
76.5 trillion.

The government may have responded quickly to end the fuel
shortages, but it has not provided the core solution: energy
conservation.

Almost two weeks after fuel shortages started making
headlines, no specific conservation plans have been announced.
Several options -- progressive taxes for vehicles, unsubsidized
gasoline for cars with larger engines, switching off lights in
buildings and shopping centers earlier -- have been tossed
around, but no binding decisions have been made.

Pertamina's plan gradually to reduce the premium gasoline
supply in major cities during weekends, when people usually go
out for fun instead of for work, was unceremoniously dropped.

Pertamina should have taken some lessons from state power firm
PT PLN last month, when for two weeks it experienced a 700-
megawatt shortage in peak time in the Java-Bali grid during the
tie-in process from BP's gas fields to power plants in Jakarta.

PLN asked consumers to cut electricity usage by 50 watts by
turning off two lamps between 5 p.m. and 10 p.m. With a public
campaign, this reactive measure worked and blackouts were
prevented.

Of course, the electricity crisis was much smaller and lasted
for a much shorter time than the current fuel crisis -- as long
as the state has to burn hundreds of trillions of rupiah on the
fuel subsidy, there is a fuel crisis in the country.

The PLN example, however, shows that the public can and will
pitch in to help overcome a crisis, albeit with several
requirements. Instead of just "urging" people to conserve energy,
the government must provide clear-cut actions that are easy to
follow.

More importantly, once decided, the government has to
spearhead the movement by acting as a role model. If people are
being encouraged to use public transportation, will the political
elite get on the bus as well?

But most importantly, the government needs to decide on
reactive measures -- it is too late for preventive -- to begin
saving fuel as soon as possible. There are still six months left
in the year, but they could pass swiftly by without any action
being taken.