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Gas Shortages Fuel Tensions in Indonesia

by Dion Bisara, Tunggadewa Mattangkilang & Vento Saudale. Posted on November 29, 2012, Thursday

In East Nusa Tenggara, the queues from gas stations stretched for over a kilometer. In Bogor, the gas stations were closed altogether. And in East Kalimantan, hundreds of households were grappling with the aftermath of angry violence from motorists who couldn’t get what they sought, Jakarta Globe report.

Across Indonesia in recent days, the impact of the shortage of subsidized fuel has been felt, and on Tuesday, the national government gave an idea of the scale of the problem — the country is set to exceed its quota for the year by 1.2 million kiloliters, punching a Rp 6 trillion ($625 million) hole in the national budget.

In Kefamenanu, East Nusa Tenggara, motorists queued on Tuesday for almost a kilometer at gasoline stations. Some were unsuccessful, and were told to return today — a particular blow for those whose wait means sacrificing wages.

Public transportation was not operating at full capacity either because of the shortage, forcing students and office workers to seek out alternate transport.

State energy company Pertamina has sent at most 30 tons of fuel each month to meet demand in Kefamenanu, local gas station operators say.

In Bogor, West Java, several gas stations were closed on Tuesday due to a lack of subsidized fuel.

Impatient motorists, including public transportation operators, were seen filling their tanks with non-subsidized Pertamax since it was nearly impossible to get Premium, their usual subsidized fuel choice.

A local gas station operator revealed that although the station usually received 24 tons of fuel each two or three days, lately Pertamina was only able to provide it with four tons.

Realizing that further unrest could sprout across Indonesia from the shortage, Pertamina terminated its quota-based distribution of subsidized fuel on Nov. 19.

The quota-based distribution policy was initially meant to control supply in accordance with the state budget ceiling, under which supply to gas stations would be reduced by 10 percent each delivery and would gradually be phased out.

Many people have blamed the program for creating severe fuel shortages in various parts of the country.

Coordinating Economics Minister Hatta Rajasa on Tuesday said that the government had removed the distribution cap “to prevent [such] incidents from repeating in the future.”

But Indonesia’s consumption of subsidized fuel will exceed the initial quota stipulated in the revised 2012 state budget by 1.2 million kiloliters. The quota is expected to run dry by Dec. 24, so additional subsidized fuel will be needed to meet growing domestic demand, industry experts say.

Officials, however, expressed confidence in Indonesia’s fuel supply stability, given that world oil prices are fluctuating at around $105 per barrel.

The cost of the extra 1.2 million kiloliters of subsidized fuel would not exceed Rp 6 trillion, the officials said.

Nevertheless, the state will have spent Rp 159.4 trillion on subsidized fuel by the end of this year, including the additional Rp 6 trillion. It was not immediately clear on Tuesday where the additional funds would be sourced from.

To solve the subsidized fuel issue, the government must initiate two remedial methods, according to Komaidi Notonegoro, vice director of the Reforminer Institute think tank.

In terms of fiscal easing, the government needs to raise industry earnings, while in the non-fiscal sector, it must narrow the price disparity between subsidized and non-subsidized fuel, he said.

Finance Minister Agus Martowardojo said he would prefer consumption of subsidized fuel this year remain under the quota, but added that the government would offer more subsidies if necessary.

The government has also cancelled a plan to publicize this coming Sunday as a “day without subsidized fuel” in Java and Bali, as well as five other cities — Medan in North Sumatra, Palembang in South Sumatra, Batam in the Riau Islands, Balikpapan in East Kalimantan and Makassar in South Sulawesi.

The government will instead call on affluent people to refrain from purchasing subsidized fuel since they can afford the alternatives.

The government will be hoping angry motorists can contain their temper. In Barong Tongkok, East Kalimantan, over the weekend, violence influenced by fuel shortages and long queues led to communal conflict. Since early Sunday, 400 market stalls and a gas station have been burned to the ground there.

Police say the unrest was prompted by an altercation between a customer and a gas station attendant. The customer incited an argument after being told there was no fuel left. The attendant apparently hit the customer, who returned with fellow villagers who then ran riot.

East Kalimantan Governor Awang Farouk has invited Kalimantan’s four governors to discuss Pertamina’s commitment to the fuel quota given the recent spout of fuel shortage-induced violence.

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