TEMPO.CO, Jakarta - Vice President Jusuf Kalla said that the global crude price hike will does not affect the amount of fuel subsidy in Indonesia. This, he said on Tuesday, is because the government implements a fixed-subsidy policy.
The fixed-subsidy policy was put in effect in 2014. Regardless of how much global prices are, fuel subsidy is set at Rp1,000 per liter.
A fixed subsidy will allow Indonesia's fuel sales price to fluctuate along with global oil price changes. Kalla said the public will automatically know that fuel prices will rise when global crude prices increase.
"It will be followed automatically by changes in domestic prices, but the amount of subsidy is not reduced," Kalla said in Jakarta, Tuesday.
Global oil prices are increasing amid expectations that Organization of Petroleum Exporting Countries (OPEC) members will agree to cut production this week.
On Monday, Saudi Arabia and Iraq agreed to extend their supply cut period to nine months in a bid to boost prices. OPEC members including Kuwait, Iraq, Oman, and Venezuela, are reported to support of the plan.
The West Texas Intermediate (WTI) price for June contracts has increased to US$50.73 a barrel at the New York Mercantile Exchange. Meanwhile, Brent North Sea crude for July contracts rose to US$53.87 per barrel.
AMIRULLAH SUHADA