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Indonesia to consider cutting fuel prices

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Indonesia to consider cutting fuel prices
Indonesia government will discuss lowering fuel prices following the drop in global crude oil prices during a meeting this week, but it is unlikely a decision will be reached until next year, reported local daily the Jakarta Post.

"The government will adjust fuel prices according to falling global crude oil prices as long as the change is allowed by internal factors," Vice President Jusuf Kalla was quoted as saying.

"The prices will be adjusted if state finance allows it. The government will never take profits from the fuel subsidy. The subsidy depends on its value as approved by the House of Representatives."

Kalla, who is also chairman of the Golkar Party, was responding to a request made by the party's West Java chapter Uu Rukmana during the Golkar Party's meeting at the Savoy Homann Hotel in Bandung on Sunday.

World crude oil prices, which reached almost $150 per barrel in July, this year, has dropped nearly 50 percent since the start of the global financial crash early this month on fears the global economic slowdown.

Kalla said there were three main factors in deciding domestic fuel prices: The stability of global crude oil prices, the strength of the rupiah against currencies of countries that sold oil to Indonesia, and the value of the fuel subsidy as decided by the House.

"The current crude oil price of $64 per barrel is still fluctuating and is not yet stable," he said. "How long will it stay at $64? It could reach $70, fall again and rise again and could hit $80 per barrel again. "It's not yet stable. If it is stable for a month then we can hold it."

Kalla said the fuel subsidy was calculated using a set fuel price based on the average price of fuel in the previous year called the Indonesian Crude Price (ICP).

"Crude oil was $140 and now it is $64 per barrel. We should get the average price first before calculating the subsidy," he said.

State Minister of National Development Planning/National Development Planning Board chairman Paskah Suzetta said domestic fuel prices could be lowered if global crude oil prices remained stable through early 2009.

"We can calculate later but I don't think we can do it this year," he said.

"We have to wait for at least one month to see how the prices fluctuate. We will decide when the prices are stable and no longer fluctuating."

Paskah said the ICP would have to drop below $100 per barrel to prompt the government to decrease fuel prices.

"Currently, the average ICP is $95-100, which is lower than the price set earlier this year at $115 per barrel," he said.

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