Indonesian fuel prices to come down in April

JAKARTA. A drop in fuel prices will be announced in April following the dip in global oil prices, according to Minister of Energy and Mineral Resources Sudirman Said.

"We are calculating the price reduction and adjustment. The drop in fuel prices will be announced in April," Sudirman noted here on Friday.

The adjustment was assessed based on the drop in global oil prices and the condition of the rupiah against the US dollar.

"Hence, we will take into account all aspects while determining the adjusted fuel prices," the minister stated.

However, Sudirman could not as yet explain the value of adjustments in fuel prices.

"We are calculating the figure carefully as it is for the next quarter," the minister remarked.

Currently, the price of premium gasoline in the regions of Java and Bali stands at Rp7,050 per liter, while the price outside Java, Madura, and Bali is set at Rp6,950 per liter, and subsidized diesel at Rp 5,650 per liter.

Referring to Energy and Mineral Resources Ministerial Regulation No. 4 of 2015, the government evaluates fuel prices every three months based on the latest update on the benchmark price.

The government should exercise caution in setting the prices of premium gasoline and diesel oil for the April-June 2016 period due to a fluctuation in global oil prices, Executive Director of Energy Watch Indonesia Ferdinand Hutahaean stated earlier.

The fuel prices for the period will surely use the Mean of Platts Singapore (MOPS) for the January 25-March 24, 2016, period when the global oil price hits its record low, he noted in a press statement released on Thursday.

In such a situation, the fuel prices will fall short of expectations at the expense of the government's and state oil and gas company Pertamina's interests, he emphasized.

He noted that the global oil prices currently show an upward trend after they fell in January and February.

As per the Minister of Energy and Mineral Resources Regulation Number 39 of 2014, the fuel prices are set based on the average market price index and the rupiah's exchange rate against the US dollar using Bank Indonesia's purchasing rate on the 24th of the previous month.

The fuel prices for the January-March 2016 period are based on MOPS and the average exchange rate in the September 25-December 24 period. As a result, the price of diesel oil was set at Rp5,650 per liter and non-subsidized premium gasoline price at Rp6,950 per liter for Java, Madura, and Bali and at Rp7,050 per liter for the rest of the country.

According to Ferdinand, if the government lowers the fuel prices according to the average MOPS for the January-March 2016 period, the decline will not automatically boost economic growth.

"The government has no instrument in the field when the fuel prices fall. As a result, the prices of basic commodities, including transportation costs, decline," he explained.

He proposed that the government should change its fuel price policy by setting fuel prices based on the market mechanism or adopting a flat fuel price system by outlining the upper and lower limits.

Since it is not allowed to decide the fuel prices based on the market mechanism, the government should adopt a flat fuel price system by setting the lower and upper limits, he added.