Thursday August 11, 12:48 PM Oil Price Surge Could Hurt Indonesian Economy: Minister
PURWAKARTA, W Java, Aug 11 Asia Pulse - The recent jump in the global price of oil to US$64 per barrel may harm the Indonesian economy because the figure far exceeds the US$60 per barrel assumed by the government, National Development Planning Minister Sri Mulyani said here Wednesday. "The surge is alarming as the present world oil price is far beyond our expectation of US$60 per barrel," Sri Mulyani told a working meeting of the Industry Ministry. She said the surge in the world oil price would cause a deficit in the state budget and she suggested that the government stick firmly to its fiscal policy (to increase income from the tax sector). The government, she said, should make efforts to reduce oil consumption by promoting the use of alternative energy sources. "Alternative energy sources should be resorted to when the crude oil price continues to rise," she said. On the government's efforts to reduce its fuel oil subsidy burden, Sri Mulyani said the government was not in a hurry to increase domestic fuel oil prices again because formulating a proper compensation program for low-income families would take time. The government raised domestic fuel prices last March by an average of 29 per cent. Meanwhile, in Jakarta, Finance Minster Jusuf Anwar said the surging global oil price was not endangering the state budget because the government already knew how to overcome its consequences. The effects of the increasing world oil price, he said, can be overcome through a variety of tight fiscal policies such as cutting expenditures and increasing state income, he said. The government would raise state income through more intensive taxation, privatization, raising import duties, state enterprises dividends and selling assets, he said. The revised state budget 2005 had set the tax income target at Rp 276 trillion (US$28.2 billion), that of income from state enterprise privatization at Rp 3.5 trillion and that of income from government assets selling at Rp 4.5 trillion. Jusuf also said the government should stop subsidizing the domestic fuel oil sector as the subsidy was in practice being enjoyed by rich people including foreigners. He said the government's domestic fuel oil subsidy scheme must be altered but he did not know when this would be done. (ANTARA) http://asia.news.yahoo.com/050811/4/25hki.html ====================================================================== High oil price reflects low OPEC spare capacity, market enigmas: IEA Thu Aug 11, 4:22 AM ET PARIS (AFP) - The price of oil has risen to about 65 dollars a barrel because of uncertainty on all fronts and low spare production capacity in OPEC, but underlying likely growth of world demand remains unchanged, the IEA said. However, high prices had so far had only "limited" effect in reducing demand and fortunately had not reversed economic growth, the International Energy Agency said. The IEA held steady its forecast for growth of overall demand at 1.60 million barrels per day this year and 1.78 million barrels next year, allowing for an easing of apparent demand for oil in China and a small upward adjustment for US demand. The agency highlighted apparent contradictions in some statistical trends owing in part to downward revisions of past demand figures. It said that although the surge of oil prices had caused a "limited" fall in demand and had led consumers to turn to other sources of energy, high prices "have not completely choked off oil demand growth". It added: "Neither (so far) has the impact been sufficient to reverse economic growth and that is no bad thing." Signs were emerging that oil companies were increasing spending on investment. Meanwhile stocks of oil had increased "rapidly" in the first half of this year despite high prices, but the market "clearly" took the view "that more inventories are needed until investment responses catch up and demand patterns are clearer." But one problem was "wariness on the part of OPEC members to overinvest in spare capacity". The Organisation of Petroleum Exporting Countries had increased its supply of oil in July by 285,000 barels per day to 19.6 million barrels owing to increased production by the United Arab Emirates, Saudi Arabia, Iran and Iraq. Estimated demand for oil from OPEC members was steady at 28.2 million barrels this year, although it would rise to 29.2 million barels per day in the fourth quarter. However the IEA revised upwards its estimate for demand for OPEC oil next year to 28.3 million barrels per day. The IEA repeated earlier explanations that many factors, several of them being liable to change quickly such as hurrican weather and other disruptions of supply in North America and the North Sea, affected real and perceived supply patterns. Stocks held by industry in all 30 members of the Organisation for Economic Cooperation and Development had changed little in June from the May figure, but in the second quarter they had increased by 1.32 million barrels per day, or to 420,000 barels per day above the five-year average. The IEA stressed that although Iran, Nigeria and Qatar had increased their spare production capacity, the only significant spare capacity in OPEC lay in Saudi Arabia. The report said: "Depending upon one's assessment of Saudi sustainable crude oil production capacity (most estimates lie in a 10.5-11.0 million-barrel-per-day range), this amounts to some 1.0-1.5 million barrels per day currently. "For Saudi Arabia and other OPEC producers, spare capacity is the one real tool for price control they possess. For now however, OPEC producers aside from Saudi Arabia have little market influence as their spare capacity has been almost exhausted." Excluding the risk of disruptions to supply within some OPEC countries including Saudi Arabia, "spare capacity amounts to less than 100,000 barrels per day". The report added: "And Saudi Arabia's spare capacity at present largely consists of heavier and sourer Arab Medium and Arab Heavy grades at a time where there is scant availability of refinery upgrading capacity." http://news.yahoo.com/news?tmpl=story&u=/afp/20050811/bs_afp/ieaenergyoilopecproductionforecastcommodities_050811082213 ------------------------ Yahoo! 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