Sunday May 25, 2008

Indonesia hikes fuel prices by 28.7% despite protests

channelnewsasia.com :

Indonesia hiked the cost of fuel by around 30% Saturday [24 May 2008] in response to soaring global oil prices and a ballooning subsidy bill, leaving hard-pressed households facing even more economic woe. Long queues formed at petrol stations ahead of the announcement late Friday [23 May 2008] that prices would rise by an average 28.7% from midnight due to record oil costs that have sucked state money out of social programmes. Many ordinary Indonesians say higher fuel prices combined with the recent surge in the cost of food will put an intolerable strain on family budgets.

The price hike sparked protests across the sprawling archipelago of 234 million people when it was flagged earlier this month by President Susilo Bambang Yudhoyono. The government was at pains to point out that even with the price hike Indonesians still enjoyed some of the cheapest fuel in the world. Indonesian motorists are now paying 33.33% more to fill their tanks with premium gasoline at 6,000 rupiah (65 cents) a litre, while diesel has leapt 27.9% to 5,500 rupiah. Inflation came in at just under 9% in April and is tipped to reach 12% in the coming months as the new fuel prices ripple through the broader economy. The last fuel price rise in Indonesia was a whopping 126% in 2005, sparking mass demonstrations but no long-term unrest.

- As crude oil prices continue to set new records, governments which have been subsidizing fuel prices are finding it harder and harder to keep up their fuel subsidies without running into serious budget deficits, or in some cases making existing deficits even worse.

Indonesia has it particularly bad, with its rapidly depleting oil and gas fields proving to be a double whammy for the government as reduced production results in both less supplies for domestic use and less foreign exchange from exports. The situation may not be good for the overall geopolitical stability of the region as well.

See also :

1. Indonesia's LNG supremacy wanes as Chevron's fields run short
2. Batam threatens to block Indonesian natural gas supply to Singapore
3. Indonesian firms to build LNG terminal (and why Singapore should go nuclear)
4. Indonesia becomes a net crude oil importer
5. Indonesia crude oil output falls to 35-year low
6. Indonesia considers quitting OPEC

(2008-05-25 11:02:32 SGT) [Energy] Permalink

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