Fuel Pricing and Subsidies in Indonesia : Reaching an Equitable and Sustainable Policy
Indonesia is an oil producing country and is the only East Asian member of the Organization of Petroleum Exporting Countries (OPEC). Over the years, this endowment of oil resources has been steadily exploited with substantial rents flowing to the g...
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| Format: | Energy Study |
| Language: | English en_US |
| Published: |
Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2012/01/16461267/fuel-pricing-subsidies-indonesia-reaching-equitable-sustainable-policy http://hdl.handle.net/10986/12712 |
| Summary: | Indonesia is an oil producing country
and is the only East Asian member of the Organization of
Petroleum Exporting Countries (OPEC). Over the years, this
endowment of oil resources has been steadily exploited with
substantial rents flowing to the government from production
and exports of crude oil. The country is also one of the
world's largest exporters of another petroleum
resource, liquefied natural gas. The introduction of a new
oil and gas law in 2001 (the law) provides the policy and
legal basis for moving away from the present ineffective and
fiscally inefficient fuel pricing and subsidy regime,
towards the goal of an independent, reliable, transparent,
competitive, efficient, and environmentally friendly
petroleum sector that encourages the growth of the national
potential and role and at the same time does not exclude the
Government of Indonesia (GoI) fully meeting its social
responsibility towards certain community groups.
Implementation towards achieving the goals set out in the
Law has been slow and hesitant. The Indonesian treasury is
still saddled with a rather inefficient and ineffective fuel
pricing and subsidies regime. This present report identifies
a way forward for Indonesia to meet the requirements of the
Law. That way forward will progressively eliminate the waste
inherent in the present system, signal correct market
behaviors to consumers, achieve large fiscal savings and
help the economy grow while the any negative impact on the
poor and vulnerable are cushioned. Chapter one tracks the
recent history to the present situation in terms of
petroleum fuels utilization, supply, pricing and subsidies,
and identifies some of the key impacts of the prevailing
policies. Chapter two identifies the target petroleum fuel
market regime based on the goals established in the law,
evaluates where the present policy falls short, and proposes
measures that will help Indonesia achieve the outcomes that
are consistent with the law. Chapter three proposes a
step-wise transition that will be required to transform the
present regime and at the same time opening the oil products
market to the beneficial forces of competition and
restructuring Pertamina's downstream operations. |
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