Tuesday, 30 September 2014


PT Pertamina [Persero] finally normalized supply of premium and solar oil. This BUMN oil distributor company eased distribution restriction to prevent long queue in some gas stations.

Pertamina took the measures after having directives from the Government. Pertamina had been observing the development in the market in a few days. Normalization of supply had been executed since Tuesday last [26/8] to normalize situation so there would be no more axing of supply, for premium or solar.

Still pipelining of oil would be done the measured and focused way according to local conditions. Pertamina’s data had it that the average solar distribution in all of Indonesia came to 43,047 KL per day while the average distribution of premium oil was posted at 80,155 KL per day.

Previously Pertamina axed pipelining of Premium to some gas stations from the previous 24 thousand liter per year to be only 8 thousand liters per day. The policy was meant to save pipelining of subsidized oil and the portion for it was based in APBN-P 2014 from 48 million to become 46 million KL.

In spite of relaxing policy, Pertamina stayed to be an the alert of any possibility of quota restriction might cause to exceed quota in APBNB-P State Budget 2014. In fact quota was the basic of calculation in controlling distribution.

The Ministry of Energy and Mineral Resources Jero Wacik stated that long queue at gas stations was the consequences of limited supply of subsidized oil. He pled the public, especially of the upper middle class, to buy non subsidized oil for their private cars.

About the recommendations that the Government increases oil price, the Ministry was quite upset. As known he had proposed oil price to be increased, but his proposal was objected by some fraction in Parliament who would be the ruling party in the next Government.

So far there had been no plan to increase price of subsidized oil because the Government was still waiting for the outcome of meeting between SBY the ruling President and Jokowi the elected President on 278.

The Ministry of Finance believed that restricted distribution of subsidized oil was necessary. The reason was that oil restriction would not have any impact on inflation significantly. Inflation might occur on small scale in fuel commodity; such was because consumers who were accustomed to use Premium oil at Rp6,500 per liter would have to spend more money of buying Pertamax, but the contribution to total inflation was small.

From past experience lesson was leaned that inflation only occurred if the Government increased price of subsidized oil, such as in June 2013 when the Government increased price of Premium oil from Rp 4,500 per liter to Rp6,500 per liter and solar from Rp 4,500 per liter to Rp 5,500 per liter, inflation soared up in July and August; but the reaction was only momentary.

As oil distributor, Pertamina had to make sure that quota for Premium and Solar oil was in accordance with Law No. 12/2014 on amendement of APBN 2014 so quota of 46 million kiloliter had to be kept from exceeding quota till end of the year.

Under such circumstances there were only 2 options to choose from: Firstly, to pipeline subsidized oil normally on condition that oil quota must run out before year end, i.e. mid November for solar oil and mid December for Premium oil. Furthermore consumers must buy non subsidized oil till of year. Secondly, to regulate volume of distribution each day till end year.

Technically Pertamina regulated distribution of subsidized oil evenly based allocation for each gas station and other appointed distributors as per August 18 2014 last. To ensure oil Pertamax, Pertamax plus, Pertamax Dex and non subsidized solar.

Only trouble was that the two options were dilemmatic afield. Evidently small business circles were affected by restriction on subsidized oil. They claimed that increase of subsidized oil price would increase operational cost. At the moment they were in wait-and-see position although increase of production cost was just before them.

Their reserved attitude of not increasing product price as impact of the restriction rule might not last long if the condition increased operational cost. The effect could boost inflation. They were expecting that the Government could increase quota for subsidized iol for the public.

Apparently the impact of quota restriction was already felt in some regions. An example was a gas station in Padang Sidempuan, North Sumatra on Wednesday August 27, 2014 past. Although the gas station was only to open early morning, hundreds of cars waited on a long queue line just to get their share of fuel. The effect was that was that hundreds of cars were trapped in a jam at Imam Bonjols street for 2 kilometers long.

To troubleshoot fuel scarcity problem, the gas station at Indra Angkola restricted buying of fuel for public transportation, trucks, and private cars. For big vehicles, maximum permitted buying was Rp 400 thousand, while private cars and public transportation were only allowed to buy not more than Rp 200 thousand of gas.

Meanwhile scarcity of fuel in Jember, East Java, caused hundreds of inter-city and inter-provincial buses to stop operating. Apparently the bus departures in Tawang Alun terminal, Jember was empty as passengers changed to train. At that time only short distance connections like Jember-Probolinggo and Jember-Banyuwangi were operating. Some drivers decided not to operate their buses. If they had 100 liters of fuel, it was only enough for one single journey, even that had to be obtained after 7 hours of waiting. The reset choosed to park their cars in terminals. Data showed that at Tawang Alu terminal there were 222 buses operating, at the moment there was only 1 armada consisting of 90 buses.

The tragic thing was that at gas station in Panji, Situbondo one motor cycle rider collapsed after waiting in the long line. He collapsed under the blazing sun when trying to buy Pertamax type oil.

Ever since restriction of oil quota was applied, long queue of vehicles waited at gas stations along the Pantura coastline. Car and Motorcar drivers waited for hours to get subsidized fuel, especially Premium. Some had their patience to wait, ending in failure to get subsidized oil at Rp6,500 per liter and then they had to buy from the blackmarket or buy Pertamax at Rp11,300 per liter.

Pertamina argued that the queue was not caused by scarcity of oil but because of restrictions in distributing subsidized oil not to exceed quota till end year. Queue was more caused by anxiety or fear that the would not get fuel.

The long queue could be regarded as serious or not serious. If the chaos was not immediately managed, it might trigger chain effect to other sectors: soaring prices of gods, blackmarketing, smuggling and other social problems. If fact all the confusion was the chronic effect of energy policy, especially oil subsidy which was never firm. The Government seem to stay away from being unpopular.

So the Government just had to be firm. It was important to realize that the public had become importer of oil which certainly burdened the budget. Subsidy could not be maintained because it was definitely off-target. The realistic solution was to increase price of oil based on cost accounting formula, accompanied by facilitating mass public transportation to avoid private cars. The public, except the poort, must not be buoyed by subsidy.

The only thing was that the Government must be consistent about using fund from austerity plan for programs really beneficial to the public. Other things noteworthy was development of alternative energy for fuel. The Government needed have to have a good roadmap to develop non fossil energy. (SS)

Business News - September 3, 2014 

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