Fuel Prices Going Up

Financial Justice International

Yogyakarta   41 days of Exile

We were going to be leaving Indonesia in the nick of time. Gas subsidies are being reduced across the board on October 1st. Rallies and demonstrations were starting in both Jakarta and Jogya, as we prepared to close down the Organizers’ Forum for another year. We had moved out of Jakarta as the marches were beginning. Meeting with INSIST — the Indonesian Society for Social Transportation — in answer to a question during our visit they were able to describe plans for marches coming from four points of the compass aligning with the locations of different universities in Yogyakarta.

This issue is not as simple as our own immediate identification with escalating gas prices as the prices hover around $3.00 per gallon in the United States. Gas prices have been significantly subsidized in Indonesia for quite a number of years. The country has almost been kicked out of OPEC because it can not control its own production and is the only one of the OPEC countries that has to import oil. Estimates indicate that the subsidies cost the country more than $1 Billion USD per month, which this poor country can hardly afford. The subsidy makes the relative price of gas less than $1.00 USD per gallon — a third of the US price for example. Additionally, the vast traffic of Jakarta and its teeming millions of motorbikes, cars, and SUV’s is partially laid right at the footsteps of this subsidy.

There is no issue that has more political pop in Indonesia that this gas subsidy. In 1998 a proposal boost prices by 71% let to riots that left 1200 dead and brought down Suharto — finally. In 2000 President Wahid boosted prices by 12% after having walked away from the increase earlier in the face of protests, and then he pushed another 30% through in 2001. President Megawaiti proposed a 22% increase in 2003 and roll back the rates after 2 weeks of protests. Now President Susilio Bambang Yudhoyono (popularly referred to as SBY) has been prepping the public for a boost of about 29% since March. Government and many others are holding their breath. The big sales pitch — truth having real value here — is that the worldwide increase meant that the previous level of subsidy was breaking the bank. Even with this increase the subsidy is still arguably too much, but…

The offset for the poor was a cash subsidy for 15,000,000 families that quailed because their income was significantly low and their calorie intake per family was less than 2100 calories per day. This offset would be good for 3 months and be about $30 US per day — hardly a giveaway program! SNY had argued that the hike they were facing would be equal to the cost of building 1000 new school buildings and providing free medication at 3rd class wards in state hospitals. Of course the problem for the poor is not gas but kerosene, which is the essential fuel for cooking. The prices for kerosene seem to have jumped phenomenally, and perhaps proportionately more than gasoline as the “base balancing” common to all politicians squeezes the poor the hardest. Achieving some equity should have been a permanent criteria, not just something for 90 days.

The entire region seems caught in the cycle of cost increases around utilities. Electricity hikes were all over the news in Cambodia. The gas subsidy was also going to have to be reduced in Malaysia as well.

Embracing the reality of the high price of scarcity seems to be something we all have to come to recognize. How to round off the inequities beneath these world wide changes in our economic and social life seem to be areas where we are still running from the reality.

September 30, 2005