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Indonesians Grappling With Energy Crisis


Indonesia is facing fuel shortages that could threaten its economic and political recovery. The energy crunch has become acute in the past several weeks. Motorists have been facing long lines at gas stations, and daily power outages have become a way of life in some parts of the archipelago.

Indonesian President Susilo Bambang Yudhoyno has called on the public to remain calm in the face of the fuel shortage and stop hoarding gasoline, which he says is making the problem worse and driving prices higher. The government says it will implement an energy saving policy next week that Mr. Yudhoyno promises will help end the shortage.

But critics say the government's proposals, which include restricting energy consumption in government buildings, malls and private homes, and dimming the street lights in the capital Jakarta, are only short-term solutions.

Increasing global oil prices, higher consumption in Indonesia, government fuel subsidies and limited refining and distribution capacity all contributed to the current crisis.

This year, Parliament approved more than $7 million in fuel subsidies, but economists say high oil prices mean Indonesia needs more than $10 million to cover the actual cost of subsidies.

Economist Chatib Basri, director of the Institute for Economic and Social Research at the University of Indonesia, says the state-owned oil and gas company, Pertamina, cannot afford to meet the demand.

"Pertamina has to buy oil at a very high price, but they have to sell it at a very low price here. So, Pertamina cannot subsidize this fuel price. It should be subsidized by the Ministry of Finance. So, the supply limitation, and also the high demand, lead us into this situation now," said Mr. Basri.

Although Indonesia is a member of the Organization of Petroleum Exporting Countries, OPEC, it also imports some oil and refined oil products.

The country has the 12th largest known reserve of natural gas in the world, but most of the gas is exported, because Indonesia does not have the refining or distribution capacity to use it at home. The same goes for its coal industry. Indonesia has rich deposits of high quality coal, but most of what is mined is exported.

Ordinary Indonesians bear the brunt of the shortages.

Chandra is a businessman waiting in a long queue to fill up his car at a Jakarta gas station.

"It is just not convenient, because you are going to work, and any time you want to find gasoline, and you just can't. So, it's definitely quite worrying," he said.

Driver Yusef, who supports his family by ferrying passengers across the capital, especially during Jakarta's notorious rush hours, is fearful the gas shortage will lead to social unrest.

Yusef says the motorcycle drivers are worried in Jakarta, because they see the problems are getting worse in the provinces, and he says they fear the same will happen in Jakarta. Yusef says, if the fuel shortage continues for another week, the drivers will take to the streets in protest.

Economist Mr. Chatib says, along with doing a better job of developing its rich natural resources, Indonesia needs to stop subsidizing fuel. It is a sensitive political issue, with past attempts ending in political unrest.

"It goes into the political issue, rather that the economic issue. If you asked me from the economic perspective, the answer is very clear. The government has to reduce the fuel subsidy, and adjust it to the international price," noted Mr. Chatib.

Earlier this year, the government did cut down on fuel subsidies, but fearing unrest, it promised to keep the prices stable, at least until next year.

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