Minister: Fuel Price Hike Result of Rising World Oil Price

TEMPO.CO, Jakarta - The prices of premium and diesel fuels were raised in accordance with the rising of the world oil price and the weakening of rupiah, stated the Coordinating Economic Minister Sofyan Djalil.

"Fuel prices have been increased only to adjust them (in line with the world price hikes) because the government no longer provides subsidy for premium gasoline. The prices are in accordance with the economic viability, but people are not yet used to it," the coordinating minister stated on Monday as quoted by Antara News.

He added that the price hikes were finalized after taking the average oil prices and the weakening of the rupiah over last two weeks into consideration in their calculations.

"Had the prices been stable, there would have been no need to make adjustments. They were increased as the world oil prices were fluctuating. We hope people at last become accustomed to it," he remarked.

Djalil explained that the fuel oil prices were calculated twice a month, but no changes in the domestic prices were made if the world oil price does not increase.

If the world oil price hiked, the domestic price could be raised, and people would then pay according to its economic viability value. However, if the world oil price declined, it would be brought down again for the people, he added.

When questioned about the announcement on fuel price hikes, Dalil noted that based on the rules of the Constitutional Court, oil prices cannot be decided by market mechanisms, but needs to be done by the government. Therefore, the government will make a decision on it.

Furthermore, state-owned oil and gas company Pertamina earlier said that the market price of premium gasoline during the January to March period experienced an average increase of 17 percent.

Deputy President of Communications of Pertamina, Wianda Pusponegoro, stated over the weekend that the basic price of diesel oil also saw a hike of about 13 percent in the same period.

"The increase has impacted the prices of the two types of fuels at home. As a result, adjustments needed to be made in the prices of premium gasoline and diesel oil fuels," she explained.

The Pertamina official added that the increase in the prices of the two types of fuels took place due to two factors.

The first factor was that during the January to March period, the global gasoline price index, in terms of the U.S. dollar, jumped 13 percent, while that of diesel oil was up by 9 percent.

She further noted that the spike took place due to the greenback's value against the rupiah increasing by 3.4 percent.

Until March 28, the government raised the price of premium gasoline from Rp6,800 to Rp7,300 per liter for regions outside Java, Madura and Bali, and from Rp6,900 to Rp7,400 for regions in Java, Madura and Bali.

It also boosted the price of subsidized diesel oil from Rp6,400 per liter to Rp6,900 per liter, for both regions inside and outside Jakarta, Madura and Bali.

Pusponegoro admitted that the increase in the prices of the two types of fuels was not in accordance with their economic viability values.

"Economic viability could be achieved if the market price index also declined," she pointed out.

The government on Saturday raised the price of premium gasoline for regions outside Java, Madura and Bali from Rp6,600 per liter to Rp6,800 per liter effective March 1.

In addition, the price of premium gasoline for regions within Java, Madura and Bali was also raised by Rp200 per liter from Rp6,700 to Rp6,900 per liter starting March 28.

Based on a presidential decision, premium gasoline is no longer subsidized.

ANTARA NEWS