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November 9, 2007

Indonesia may limit fuel sales to private cars

 Indonesia is considering limiting sales of subsidised fuel to private cars if global oil prices exceed $100 a barrel in a bid to help reduce fuel subsidies in the 2008 state budget, a minister said on Thursday. Rising oil prices have raised concerns among officials in Indonesia, the Asia-Pacific's only member of the OPEC oil exporters' cartel, since about 30 percent of its oil products consumption has to be met by imports due to flagging output. "Global oil prices are moving closer to breaking the psychological level of $100 per barrel. The problem is how we should reduce the pressure arising from the higher oil prices," the planning minister Paskah Suzetta told Reuters. The government had allocated around 45.8 trillion rupiah ($5.03 billion) in its 2008 budget for fuel subsidies assuming an average international oil price at $60 per barrel. Fuel subsidies, however, will increase if prices remain higher.

"We are now studying the possibility to limit sales of subsidised fuel to private cars. It will be only applied for private cars, not for public transport," Suzetta said. He did not give details including how the government would enforce the regulation. Oil prices pulled further back from the brink of $100 a barrel on Thursday after fresh signs of weak U.S. oil demand and a Wall Street slump fuelled profit-taking from a near 40 percent rally in under three months.

U.S. crude for December delivery (CLc1: Quote, Profile, Research) curbed earlier losses to stand 82 cents lower at $95.55 a barrel by 0209 GMT. Oil fell 33 cents on Wednesday, reversing gains that had carried the market to a peak of $98.62, the latest in a succession of all-time highs.

Courtesy Reuters

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