TEMPO.CO, Jakarta - The emergence of Vivo, a product of higher quality to Pertamina`s Premium but being sold at a cheaper price, shines lights, once again, on the irrationality of the fuel pricing policies in this country.
The public has perceived, perhaps wrongly, that the government took their wellbeing into consideration in fuel price policies. Premium gasoline is supposed to be the product of such a policy.
But the arrival of Vivo on the market shows that the fuel subsidies a’la the New Order regime are ill-targeted after all. Vivo of RON (research octane number) 89-evidently a better product compared to Premium-is available at Rp6,100 per liter, much lower than Premium of RON 88 sold for Rp6,450 per liter.
Vivo clearly is not a plague to be feared, but rather a blessing that should be welcomed. The public has long been disadvantaged by the government’s intervention in fuel pricing policies. The Oil and Gas Law No. 22/2001 stipulating that the Premium of RON 88’s price should not follow the market price prevents Pertamina from selling it at a lower price. As a result, when global fuel prices plummet, domestic consumers continue to pay the high price for Premium. Vivo exploited that ‘loophole’ to its advantage and is now selling the RON 89 fuel not governed by the regulation at a cheaper price.
Last October, Vitol Group, one of the world’s largest oil trading companies, via Nusantara Energy Plan Indonesia, inaugurated its first Vivo fuel station in Cilangkap, East Jakarta. Vitol is a Dutch oil company based in Geneva, Switzerland. In the retail sector, under Vivo Energy, the company has established its foothold in 16 African countries. It also acquired Petrol Ofisi of Turkey, grabbing the 23 percent of the domestic fuel market in the country. In Indonesia, its tie to Gerindra’s founder Prabowo Subianto once brought Vitol into disrepute.
Regardless of the ownership, the arrival of Vivo should be welcomed with open arms. It has enlivened the otherwise dead competition in the retail fuel market which has been dominated by the only player, Pertamina. The global oil companies such as Shell, Total or even Petronas only dare to play in the more expensive categories of RON90 and above.
Now, the government’s next homework is to ensure a fair and healthy competition. It should give Pertamina freedom in setting the RON88 fuel price to play against a world player such as Vitol.
However, without the amendment of the oil and gas law, the government’s plan to attract more private companies into the retail fuel sector would prove infeasible. When the floodgate to the retail fuel sales was first opened and the law was in the making, there were at least 200 private companies registered to enter the distribution sector. However, the number eventually dwindled and now only Shell and Total remained.
We should not feel allergic to foreign players in our oil industry. Numerous evidence proves that a fair competition is beneficial to consumers. The more competitive the prices are, the better the services will become. Now is the time to get rid of the Premium price control.
Read the full article in this week's edition of Tempo English Magazine