A HIDDEN AGENDA?: The Questions of Domestic Oil Price Increase.
By: Neneng Tarigan.
The Indonesian government planned early of 2012 to increase the price of premium oil, has received various reactions from number of political parties, students/activists and quite a number of people from all over Indonesia.
As usual, there is always pros and cons to every government policy. As an independent writer (note: I dare not call myself as an analyst) my opinion towards this policy is clear that I was not in favor of the policy, though the price of oil in international market that time was sky rocketing due to the political situation in oil-producing country in Africa such as in Nigeria and most particularly in countries in the Middle East such as Libya, Iraq and Iran as the largest oil-producing countries in the world!
The rapid increase of international oil price is always inseparable with the interest of the developed countries like the United States of America and its allies towards the continues supply of oil. For the reason of getting and controlling a continued supply of oil, they sometimes put pressure among others by imposing the policy implementation on the “fight against terrorism”, “the ban on Weapon of Mass Destruction” and to “help develop of democracy” in various oil producing countries. The impact of the pressure is sometimes contra productive and just further create the insecurity in those target countries, and most likely would further increase the international oil price. The ones that suffered by the increase of international oil price, of course the developing nations especially the non oil producing ones!
Being an oil-producing country, and a country with Muslim majority that strategically located between two continents (Asia and Australia) and two oceans (Indian Ocean and the Pacific), have brought Indonesia under the microscope of the developed nations!
Actually Indonesia, might play an important role in the international forum by using its geopolitical advantages as a country with the largest Muslim population in the world and located between the two continents; but the capacity is not yet there. Indonesia has almost no power to influence the policy of international oil price, even from the international political side.
Therefore, the increase of international oil price would greatly affect the Indonesian government budget, because, although Indonesia is an oil producing country, Indonesia is also a net importer of refined oil. Beside of it, the subsidy to the price of oil and gas for the poor as tasked by the Indonesian Constitution 1945, is a big burden to the government budget!
Most unfortunately, if the price of oil in domestic market is too low, that would reduce the capability of the government to finance the development programs, and besides, that would also enlarge the opportunity for smuggling, especially if the price of oil in international market is higher.
In my point of view, there are many ways that the Indonesian government can take to revive the government budget despite of increasing the price of premium oil. Most probable policies among others are by: (1) reducing government spending, (2) postponing some unnecessary spending for example for the facilities of the members of the parliament and the government officials across the country, (3) introducing the use of non oil energy for vehicles and electricity, improve the use of energy conversion from oil and natural gas into the use of more environment friendly energy such as bio energy, hydro energy or solar energy, (4) increase the efficiency of all state owned companies most particularly those companies that involved in oil, gas and electricity business, and (5) increase law enforcement to fight the corruption, etc.
Nevertheless, everyone knows that the easiest way to revive the government budget, of course mainly by implementing the policy in increasing the price of oil; with hopes that it would also easily help recover the popularity of the ruling party (the Democratic Party/Partai Demokrat) which is now under the test because of the corruption cases that involved many of its members.
The majority of the ruling party members and its coalition parties’ members hoped that by increasing the price of domestic oils, that would allow a massive implementation of direct financial assistance up to the amount of IDR 25 trillion for 18 million Indonesian house holds who lives under poverty level. By increasing the price of oil it hopes that would help the poor a financial assistance of IDR 150,000.- per household per month or equal to USD 18.- per month which is equal to 25 litter of premium oil/month, until 9 months long. As the result of this planned policy, it hopes that the ruling party may get back a full support from the people or at least from their former constituents.
The problem actually, every time when the discussion on the policy of increasing the price of oil and reducing the subsidy of oil appeared, that would trigger the increase of food prices and even become worse if the policy is taken because that would surely contributing to a multiplier effect to the price of electricity and transportation!
Subsidy is the most powerful issue and way in developing country like Indonesia to unstable the position of the government in power.
For the opposition, the subsidy issue is the most effective time to organize a massive demonstration to stop the government from taking the unpopular policy which I also believed will affect the cost of living of ordinary citizens in general!
The demonstrations against the increase of the price of oil, is always unstoppable and the tension between the government and the demonstrators might almost uncontrollable.
As always, students that stand in the very front line of the demonstrators have only one purpose; to protect the people interest with all consequences even with their own lives! A good reminder was the accident of 1998, where the most popular president of Indonesia (Suharto) with full backed-up of the arm forces and the parliament were unable to stop the demonstrators and was crippled by the people’s power!
I wish, history will not repeated and there will be mutual understanding between the policy makers and the people regarding the oil price policy.
People are tired living in poverty, but that does not allowed any policy makers to make use of people economic condition by pretending of helping them temporarily only to gain benefit to win the 2014 general election!
BSD City, 27 March 2012. By: Neneng Tarigan.