Indonesians enjoy cheaper petrol ahead of poll
INDONESIAN state-owned energy holding company Pertamina lowered the prices of its subsidised and nonsubsidised petrol by up to 800 rupiah (6 US cents) per litre on Sunday, a move some consider political ahead of the presidential election in April.
Although proposals to lower or increase fuel prices are made by Pertamina or other fuel distributors, they require the approval of the Energy and Mineral Resources Ministry before taking effect.
Pertamina lowered the price of subsidised petrol Premium, which is sold under the public service obligation (PSO) scheme, to 6,450 rupiah per litre on Java, Madura and Bali islands from the previous price of 6,550 rupiah.
As for its non-subsidised brands, the new price for Pertamax Turbo (RON 98) in Greater Jakarta is 11,200 rupiah per litre, Pertamax (RON 92) 9,850 rupiah per litre, while Pertalite petrol (RON 90) remains at 7,650 rupiah per litre.
Meanwhile, prices for non-subsidised diesel f uel are 11,700 rupia h per litre for Dex and 10,200 rupia h per lit re for Dex lite.
Pertamina retail marketing director Mas’ud Khamid sa id t he price adjustments were made follow ing a drop i n t he g loba l cr ude oi l pr ice and the strengthening of the rupiah against t he US dollar.
“We will continue to periodica lly eva luate t he f uel pr ices,” he sa id, adding that the fuel prices could differ in each region.
The price adjustment came following the slump in global oil prices after they climbed to above $80 per barrel in early October last year.
Government plan
The price of fuel is a sensitive issue in the country as fluctuations in fuel prices could significantly affect the prices of other commodities because of the associated costs of transportation.
It could also lead to high inf lation, something President Joko “Jokowi” Widodo wishes to avoid as he seeks re-elect ion in April.
In October, Minister of Energy and Mineral Resources Ignasius Jonan announced the government’s plan to increase Premium petrol prices by seven per cent following the global oil price hike, sparking protests among Indonesians who rely on the petrol brand as the country’s cheapest fuel.
The government abruptly dropped the fuel price hike hours later, with Minister of State Owned Enterprises Rini Soemarno stating she and Pertamina had not been informed of the plan, and that the company was not ready to implement it.
Policies on fuel prices have remained an indicator by which the public rates an administration’s performance, according to Saiful Mujani Research and Consulting president director Djayadi Hanan.
Populist policies
This factor led incumbents, including President Jokowi, to resort to populist policies to improve their images and woo voters ahead of elections.
“There is nothing wrong with such policies as long as they are based on r at iona l a nd obje c t i ve re a s ons. Making such policies is one of the incumbent’s adva ntages,” he told t he Jakarta Post on Sunday.
Djayadi said former president Susilo BambangYudhoyono had also resorted to such policies ahead of the 2009 presidential election. An incumbent at the time, Yudhoyono was faced with rising global oil prices and high inflation domestically.
However, social policies such as lowering fuel prices in 2008 and 2009 and the direct cash assistance scheme helpedYudhoyono gather 60.8 per cent of the vote and secure a second term, Djayadi said.
“The policy will at least give Jokowi a positive image and consolidate his support among his base and swing voters,” he sa id, a lso mentioning Jokow i’s ot her popu l i st pol ic ies, such a s t he d i st r ibut ion of la nd certif icates and v illage f unds.
Fabby Tumiwa, executive director of local energy watchdog Institute for Essential Services Reform argued that although the move could have been political, it was bound to happen considering the drop in global oil prices.
“The decrease in the prices is small and reflects the downward trend of global oil prices in the past three months. The ICP [Indonesia Crude Price], for example, has hit around $50 per barrel lately,” he said, adding that private petrol distributors such as Shell had also lowered their prices.
Energy and Mineral Resources Ministry Oil and Gas Director General Djoko Siswanto denied claims the decision was politically motivated. He said the fuel price adjustments were the result of the slump in global oil prices.
The government has tightened its control of fuel prices by requiring petrol distribution companies to follow certain formulas in the setting of prices of non-subsidised petrol. The companies were then required to report their price adjustments to the ministry, Djoko said.
“Fuel prices might have varied following the global oil price drop. So we think it’s important to analyse the data we have collected from the companies to create an evaluation system,” Djoko said during a press briefing at the ministry’s office in Jakarta on Sunday.
He added that the evaluation would be done monthly to adjust the fuel prices. THE JAKARTA POST