Government Should Regulate Fuel Subsidies Despite ICP Decrease

Jakarta, Sept 5 (Antara) - An energy observer from ReforMiner Institute Komaidi Notonegoro hopes that the government will continue to control fuel subsidies despite the decrease in Indonesian crude price (ICP). "The government should control fuel subsidies taking into consideration the already existing oil budget deficit, which has accumulated in the recent years," Komaidi Notonegoro remarked here on Friday. According to him, control policies need to be consistent in the long term, so that the fiscal remained healthy, and the public gets accustomed to managing energy consumption. "Because the ICP declines, we do not control the fuel subsidies," he noted. If fuel subsidies are not controlled then the state budget will be even worse when fuel prices increase in the next 15 to 20 years. "People are accustomed to using subsidized fuel, and thus, the cost or risk becomes even higher," he affirmed. Komaidi pointed out that the government should firmly set the policy for fuel subsidies, and it should be implemented in stages. Earlier, the ICP averaged below US$100 per barrel in August, as per data revealed by the Energy and Mineral Resources (ESDM) Ministry. The ICP team at the ESDM Ministry stated on Friday that the ICP in August was recorded at US$99.51 per barrel or down US$5.12 from US$104.63 per barrel in July. The decline was attributable to an increase in production while the demand was low. The prices in the initial 8 months of the year averaged at US$105.56 per barrel. The Indonesian state budget for 2014 was calculated based on an assumption that the ICP will average at US$105 per barrel. The ICP has declined despite increasing in the initial months of the year. In January, the price was recorded at US$105.8 per barrel. It then increased to US$106.08 per barrel in February and to US$106.9 per barrel in March before declining to US$106.44 per barrel in April and to US$106.2 per barrel in May. In June, the ICP rose again to US$108.95 per barrel before dropping again to US$104.63 per barrel in July and further dropped to US$99.51 per barrel in August. The ICP team noted that the price of Minas (Sumatran Light) crude in August was US$100 per barrel or US$5.06 lower than US$105.06 per barrel in July 2014. The refineries operated at full capacity and increased production, which was among the key factors that lead to a price fall. The oil production of OPEC rose 167 thousand barrels per day in July as compared to the previous month. The US production of crude oil in July reached 8.5 million barrels per day or a record high since April 1987.