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Last Updated: Monday, 18 July, 2005, 05:54 GMT 06:54 UK
Indonesia hit by petrol shortages

By Rachel Harvey
BBC News correspondent in Jakarta

Bajaj drivers fill up at a petrol station in Jakarta, Indonesia
Taxi drivers in Jakarta face long queues for petrol

The oil crisis is hitting Indonesia - one the world's biggest oil producers - as it struggles to end subsidised prices for petrol.

Charman sits back in his chair, his legs resting on the handle bars of his bright orange motorised rickshaw.

He's third in the queue at one of Jakarta's busiest petrol stations.

In front there's a saloon car and a motorbike; behind are a couple of taxis another rickshaw and a few more private cars.

"This is becoming a real problem", he said.

"The pumps keep running out and sometimes I've had to wait for up to half an hour for petrol. All that time I'm waiting, I can't take any passengers."

On a good day Charman makes about thirty thousand rupiah per day, about three US dollars.

But the petrol shortages which have spread across the country in the past two weeks have begun to eat into his meagre profits.

Oil producer

Indonesia is an oil producer, the only member of Opec in East Asia.

Tanker loading at BALIKPAPAN, Borneo, Indonesia
Indonesia expors large amounts of oil and natural gas

But a lack of investment in the oil sector over the past decade, coupled with a rapid increase in domestic demand has meant that Indonesia now has to import extra fuel to make up the difference.

Recent parliamentary delays in approving a revised budget meant that the state oil company, Pertamina, didn't have enough money to maintain reserves.

So supplies began to run short. Ari Soermarno, senior vice president of Pertamina, is clearly frustrated.

"We warned various parties a couple of months ago that if the money wasn't paid on time, we would have problems," he said.

"Finally, now everybody realises that it is a real crisis. I think the bureaucracy fails to recognise the impact of rising oil prices."

That is the crux of the problem.

The budget was calculated on the assumption that international oil prices would stay at around $45 per barrel.

But prices have risen to nearer $60 per barrel which means the money the finance ministry gives to Pertamina to buy fuel doesn't go as far as it used to.


President Susilo Bambang Yudhoyono has responded to the crisis by calling for a more responsible, thrifty, approach to the use of energy.

Street scene in Bandung, Indonesia
The government is afraid to reduce its massive fuel subsidies

Civil servants have been told to go easy on the air conditioning and some street lights in major cities are being switched off.

Television and radio stations have been asked to close down overnight (although there is an exemption for European football games!) and ministerial motorcades will be reduced, all in a bid to save power.

But a growing number of economists and business leaders are sceptical that such energy conservation measures will have a major impact.

Huge subsidies

The real issue at the heart of the problem, they say, is the ballooning subsidies the government pays to keep fuel prices low.

As oil prices rise, so does the cost of the subsidies.

"The subsidies only benefit the middle and upper classes", said Chatib Basri, director of the institute for economic and social research in Jakarta.

"But this middle class has a powerful voice, especially when protecting their own interests. If you ask me, fuel prices have to go up. So the question is really whether that idea, which is economically sound, is politically acceptable or not."

The trouble is, the government has already raised fuel prices once in March, and it promised not to do so again this year.

Tofu-makers worries

In a dimly lit concrete and brick shed in a back street of Jakarta, about thirty people are hard at work.

Tofu factory owner Turkino
Turkino is worried his costs will rise

Some are stirring big vats of greyish white, bubbling liquid.

Others are scooping up the thickened curd that's already been boiled, wrapping it in bits of cotton, and putting it the small packages into wooden trays divided into squares.

This is one of Indonesia's hundreds of Tofu factories, a cottage industry supplying the local community with one of its staple foods.

Turkino has been making tofu for more than thirty years. The process uses a lot of kerosene (paraffin).

Talk of fuel price rises makes Turkino nervous.

He currently employs nine staff, and is determined that he won't lay anybody off.

But other options are limited.

"I can't really raise the price of the tofu, because then people won't buy as much," he said.

"Maybe we'll just have to make the blocks smaller. But really I don't understand how we can be in this situation in these modern times. We don't ask much. We just want the government to meet our basic needs."

Subsidies vs. development

But the government has less and less to spend on people's needs, such as health care or education, because it's spending so much on subsidising the cost of fuel.

If international oil prices stay at current levels, the subsidy bill by the end of the year will be in the region of $11bn (6bn).

That's almost twice the amount that experts say will be needed to rebuild the tsunami ravaged province of Aceh.

Indonesia simply can't afford cheap fuel anymore, but it will take a lot of courage for the politicians to say that publicly.

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