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July 29, 2008

Indonesian government to lower assumed oil price

The government plans to lower the assumed oil price in the draft 2009 state budget to $130 a barrel from $140 a barrel previously, national news agency Antara reported Monday.

"We see oil prices are indeed (declining). We are still studying the drop. And we will look into the possibility of lowering it (the assumed oil price)," Coordinating Minister for Economic Affairs/Finance Minister Sri Mulyani Indrawati said here on Monday.

At the recent cabinet plenary session discussing the notes of finance and the draft 2009 state budget, the government decided to propose an assumed oil price of $140 a barrel to the House of Representatives (DPR).

Global crude prices once hit another record high of $145 a barrel but they fell to below $125 a barrel in recent weeks.

"But to avoid all possible risks we will always form fiscal risk reserves to anticipate the possibility of global crude prices soaring to another record high of $160 a barrel," she said.

The minister said global crude prices fell significantly to up to $120 a barrel in recent weeks.

Based on the global economic projections world crude prices would reach an equilibrium at around $133 a barrel in 2009 and the price of Indonesian crude (ICP) would likely reach $128-129 a barrel, she said.

"So, we will likely set the assumed oil price at around $130 a barrel but we remain conservative in that fiscal risk reserves will remain unchanged," she said.

Based on information and developments in the past 24 months, global crude prices were not likely to plunge or continue to fall, she said.

"But even if the global crude prices increase they will not reach a level of up to $200 a barrel as many people feared they could not long ago," she said.

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