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Indonesia Will Not Rule Out More Fuel Price Hikes

Reuters
Sunday, 1 Jun 2008 | 9:47 PM ET

Indonesia cannot rule out further hikes in fuel prices ahead of the 2009 presidential elections, Energy Minister Purnomo Yusgiantoro said on Sunday, due to the impact of fuel subsidies on the budget.

The government raised fuel prices by almost 30 percent last month, sparking protests in a country where millions are already suffering from rising energy and food costs.

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While Indonesia still has some of the lowest fuel prices in Asia, the issue of fuel subsidies is politically sensitive given Indonesia is due to hold parliamentary and presidential elections next year.

"The increase is about fairness. Subsidized fuels have been enjoyed by the haves," rather than the have-nots, Yusgiantoro said on the sidelines of the Coaltrans Asia Conference on the resort island of Bali.

Asked whether the government could guarantee there would be no more increases in fuel prices before the next presidential election due by mid-2009, Yusgiantoro said that was not possible.

"We cannot guarantee, we never know what happens in the future," he said, adding that between 1965 and 2000, Indonesia had increased fuel prices on 30 separate occasions.

When the government more than doubled fuel prices in October 2005, consumption fell significantly.

Net Importer

Yusgiantoro also said that Indonesia, which has decided to leave the Organisation of Petroleum Exporting Countries (OPEC), may rejoin once it had lifted production and controlled consumption. But he did not give a timeframe or further details.

Indonesia's crude oil output has fallen in recent years due to aging wells, a lack of investment and the absence of any major oil finds.

Its status as a net importer means it would benefit from lower oil prices, putting it at odds with other OPEC members, who favor higher prices.

Asia's only member of the oil cartel sees daily oil output of 927,000 barrels per day this year, down from 950,000 bpd in 2007.

Separately, Simon Sembiring, director general of mineral, coal and geothermal at the ministry, said Indonesia's long-awaited mining law could be passed before the parliamentary recess in July.

"The law must be passed, we will finish before the parliamentary recess period in July," Sembiring said, speaking on the sidelines of the conference.

Sembiring added an arbitration hearing over the sale of stakes in a copper and gold mine operated by U.S. mining firm Newmont on Sumbawa island would start in Jakarta in December.

Indonesia is home to huge mineral deposits and is a key producer of commodities such as coal, tin, rubber, palm oil and natural gas. However, uncertainty over the new mining law has held up investment in the sector.