Monday, October 10, 2005

Oil deficit troublesome

I was expecting Jakarta’a traffic would be more relax once the government raise fuel price significantly. But it turn out to be an empty dream. The first week of price hike (almost doubled the gasoline price) no sign that people might drive down. That’s not make sense to me.
“This is the first week of the month when people still have money in their pocket. Just wait for another week,” said a friend.
But when the traffic jam is there while we had entered the second week of October, I look for another answer. A taxi driver gave better answer. He said on average people are driving 40 km two-way home-office which could consume 6 liter of gasoline at the most or Rp27,000 per day. Put an escalation of 50% for commuting and traffic, the cost would only goes to Rp40,000 per day.
Given the poor public infrastructure, no incentive for commuters to stop driving. Even though government would increase gasoline price again next year by another 30 percent, consumption will persist.
So, I am thinking of a step increase in parking tariff in cities might reduce people’s driving appetite. Let say for the first hour should be Rp10,000 instead of Rp2,000 and Rp3,000 per hour onwards. The money collected should be enough for the city administration to start seriously build the mass rapid transport system.
I am deeply worried about the country’s future in energy supply and its macroeconomy impact. Indonesian love big cars simply because they could pick up all family members in a car and traveling together over the weekend. But they use the same cars for commuting on working days as well with one or two passengers. That’s why traffic jams are so bad in cities like Jakarta. And the traffic jam cost the country oil deficit which is getting bigger, cause bigger cars need more energy.
Look at the latest statistics from Central Bureau of Statistics. In the January-August 2005, Indonesia’s crude oil surplus reduced significantly to US$137 million from US$244 million in the same period last year.
Take a look at trade balance in refined oil (gasoline, diesel oil etc). Indonesia’s deficit more than doubled from US$2.14 billion (Jan-Aug 2004) to US$5,22 billion in Jan-Aug 2005. Thanks to Indonesia's net export of gas at US$5.8 billion, the country's oil and gas trade balance still in surplus of US$731 million in that period. But the surplus heavily dropped from US$2.9 billion in the same period last year. No doubt that by the end of the year, Indonesia would book deficit in overall oil and gas trading.
The reason is clear, Indonesia imported US$6,43 billion of refined oil (fuels) in 8 months this year while it’s export only at US$1.2 billion.
And if we review the automotive market this year, there is no way that fuel consumption would drop. New cars sold in Indonesian market this year have reached 400,000 and could reach 600,000 by the end of the year. Last year, Indonesia ranked first in the world as the fastest growing market with 37% growth. At least 4 million new motorcycles hit the road last year and another 4.6 million to 5 million this year.
It is clear that automotive market is not affected by increasing fuel price in the last few years. Government should capitalize on that with higher tax, right?
Imagine if tax for new cars increased by Rp10 million per car, government could raise Rp5 trillion and Rp1 million per motorcycle could raise another Rp5 trillion. On top of that, government could implement fuel tax as well.
In the supply side, Indonesia desperately needs fresh investment to boost oil output. In May, output hit its lowest level of 927,800 barrel per day, far below OPEC’s quota of 1.425 million bpd.
Investors, mainly foreign investors, blamed Indonesian for not generous enough to give incentives for oil and gas activities, lack of legal certainty, heavy bureaucracy, confusing interpretation of autonomy rules, and social problems.
But a respected blogger gave me the following reasons why Indonesian should not rely too much on foreign oil and gas investment:
- Training and career planning for Indonesian working for foreign oil and gas company are limited to enabler positions. For the core expertise, Indonesian is limited to be an assistant, not key player.
- Indonesian has no access to proprietary technology.
- Indonesian executive promotions are camuflage and ceremonial. Indonesian executives at foreign oil and gas companies are mere puppets.
- Indonesia is regarded as cash cow (US$2 billion per year) to finance their expansion. Reinvestment in Indonesia is limited.
- Asking too many fiscal and tax incentives
- Don’t think they would support government’s intention to boost output. This is a nightmere. They are playing the cornering strategy to ask more incentives from government. Wanna proof? Santos in Jeruk, Exxon in Cepu, Chevron in Central Sumatra, and Unocal in Kalimantan.
So I think of Indonesian oil and gas companies. I only know some names. Pertamina, Medco, Energi Mega Persada, and Bumi Siak Pusako. I don't know whether we could count on these companies to reduce the oil deficit. Pertamina, with all its resources, should have play a leading role. But here we are. Pertamina is a sick man. What do you think?

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October 10, 2005 2:48 PM  
Anonymous Anonymous said...

u r looking for insights on urban transport management. london provide a good example of
such practices which discourage use of private transport by pricing for parking and entry to congested zone.
even though the price of fuel has been increased, it still priced under market value.
in europe, fuel is taxed instead.

taxation on car ownership would only stop new purchases, meaning cars are getting older and still fuming the streets.
it will also harm the motorcycle industry which employs thousands. the motorcycle produced in indonesia supplies
local market. the 'motor bebeks' are hardly exported. so such policy could backfire pretty bad.

let's browse the policy menu; since u r talking about oil consumption; 100 people with 1 car each will get u 100 cars in the road everyday, consuming oil, fuming air. 1 people with 100 cars will only result in 1 car in the road...
so in respect to oil consumption, fuel taxation (meaning higher price) is the effective policy.

i agree that Indonesia needs a wholistic energy-macro economic plan. Urban areas especially Jakarta must enforce lesser dependency on private transport. rural farmers should not depend on kerosene for cooking fuel. our economy should enable us to participate in global division of labor.


October 10, 2005 3:54 PM  
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