Oil price puts squeeze on Indonesia

Surging fuel prices put a stranglehold on millions of small businesses.

indonesia fuel price hike fishermen

Like many small businessmen, fisherman are feeling the pinch from soaring fuel prices

For the fishing boats of Indonesia, going to sea has become an expensive business.


As global oil prices surge, fishermen are paying more to run their boats, but the fish they catch still sells for the same price.


“I don’t know what to do if the price keeps going up like this,” says Sunada, a fisherman who makes his living in the waters off Java.


“If we stop working we can’t eat at all, but if we go on like this we don’t make any profit.”


Depending on highly subsidised fuel these fishermen could always make ends meet.




But late last month the Indonesian government scrapped the subsidies, pushing the price of fuel up by 30 per cent overnight.


In video


Indonesia businesses struggle with high oil prices

The move triggered street protests across Indonesia, and many of Sunada’s fellow fishermen decided to stop working in the hope of better times to come.


It is just one example of how the high oil price is slowly strangling Indonesia’s economy.


At around $0.60 a litre, Indonesian petrol is still among the cheapest in the region, but even that is too big a jump for many Indonesians.


The government says it has no choice.


Subsidy bill


As oil prices soared, the government’s subsidy bill ballooned to more than $12bn a year – money, it says, could otherwise be spent on education and health care.


The government says it too is a victim of high oil prices and in a sign of the times it has decided to quit OPEC, the oil producer’s cartel, of which it was a founding member.


Global oil price


Sri Mulyani Indrawati, Indonesia‘s finance minister, said the withdrawal is an indication of the government’s concern over frustration with soaring commodity prices.


“It is more that we want to voice our concern – not only over oil, now we are also concerned about food,” she says.


“If food is priced at a level that is not justified economically and is driven more by speculation and by narrow political interest, it’s going to be damaging the global interest, damaging many countries and poor countries especially are going to suffer first.”


Five years ago, Indonesia was still an oil exporter, but lack of investment has seen oil wells dry up and Indonesia‘s oil output plunge.


Economists blame mismanagement, and bureaucratic hurdles.


Purbaya Yudhi Sadewa, a Jakarta-based economist, says a lack of strong leadership means the climate needed to attract new investment simply does not exist.


“The regional autonomy creates too much bureaucracy and we don’t have strong enough leadership to realise and rectify that problem,” he says.


Fishermen like Sunada face ruin if fuel prices
continue their current course

Indonesia wants to return to exporting oil in the next five years.


But Indrawati says moves to hand more power to the country’s regions has made the task more difficult.


“Local government are in euphoria now they have more power and authority rather than actually using it for good and the benefit of their people,” she says.


The challenge, she says, is finding the balance.


Meanwhile, as the price of oil continues to rise on world markets, so too will fuel costs in Indonesia.


And for fishermen like Sunada, that could mean the end of their business.

Source: Al Jazeera