Indonesia considers Opec pullout

Falling investment and ageing wells drag down national oil production.

    Soaring fuel prices are placing a growing strain
    on the Indonesian economy [EPA]

    The only Asia-Pacific member of the Organisation of Petroleum Exporting Countries, Indonesia's oil production has declined steadily from an average of about 1.5-1.6 million barrels a day in the mid-1990s.


    Subsidy

     

    Indonesia joined Opec in 1962, just two years after the group was founded in Baghdad.

    Indonesia's parliament and a number of industry groups have been calling for the government to withdraw its membership.

    The government faces difficult decisions over how to contain inflation and curb an expanding budget deficit as its subsidy bill balloons because of rising global oil prices.


    With crude oil already hovering around $120 a barrel Indonesia has had to allocate $13.77 bn this year to fuel subsidies, or about 13 per cent of government spending.

    On Monday the Indonesian government announced it was preparing to raise fuel prices by up to 30 per cent to avoid a budget crisis.

     

    Fuel price rise

     

    Boediono, Indonesia's senior economic minister, said while fuel prices would rise in the "coming weeks", the country's poor would receive some form of direct compensation.

     

    The decision to cut subsidies that keep petrol, diesel fuel and kerosene affordable to the country's millions of poor risks triggering protests and political opposition from parties jockeying for position ahead of lections next year.

    The government last raised prices in 2005, defying protests and winning
    praise from international donors.

     

    To cushion the blow, it provided direct cash payments to the poor.

    SOURCE: Agencies


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