The dazzling phase of world oil price recently has pushed many governments all over the globe to adjust their domestic fuel price. Crude oil price shown by WTI and Brent price has peaked to 105 USD/barrel. The three-month average price in 2011 (Jan-Mar) is 90 USD/barrel. The surging oil price indicates either higher demand or unstable supply. The recovery of world economy as a whole has driven the demand up higher, plus the instability in mid-east nations both dragged the oil price up sky high. With the mid-east situation unrests, there’s no short-term possibility of lower oil price.
Indonesia, by APBN 2011 set oil price in 80 USD/barrel. The government has been planning on adjusting the oil price assumption for its APBN. The spread of the adjustment so much correlates to Indonesia’s budget deficit. With its plan to decrease subsidy on fuel price for consumption, the wild movement of world oil price might stir the government plan back to square one. Basically, the calculation of government’s ‘harga keekonomian’ of oil price is with one single formula; it is MOPS price plus 10 USD, alpha (the spread Pertamina requests to cover distribution and operational cost), exchange rate, and taxes. Hence, with the assumption 90 USD/barrel MOPS price, 9000 USD/Rp, 12% alpha, 15% VAT and 5% fuel tax, the economic price of domestic gasoline is 6.889 Rp/lt (Rupiah/liter). Thus the subsidy from the government is Rp 389 times total oil distributed to the economy.
Let’s now imagine if world oil price could reach beyond 100 USD/barrel level.