mises
Joined: 05 Nov 2007
Location: retired
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 Posted: Wed May 28, 2008 9:27 am Post subject: Indonesia to Pull Out of OPEC as Oil Output Drops |
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May 28 (Bloomberg) -- Indonesia, the only OPEC member in Southeast Asia, will pull out of the group after aging fields and declining production force the region's biggest economy to boost imports as crude oil prices reached records.
Energy Minister Purnomo Yusgiantoro will sign a decree today to exit the Organization of Petroleum Exporting Countries, he told reporters in Jakarta. The nation, a member since 1962, has been considering leaving the body in the past three years.
Indonesia imports about a third of its oil because of inadequate refining capacity and faces falling output as disputes with Exxon Mobil Corp. delayed field developments and deterred investments. The country's oil output has slumped 49 percent from a peak in 1977 while subsidies to cap domestic diesel and gasoline prices may exceed $13 billion this year.
``There is an opportunity lost,'' said Fauzi Ichsan, chief economist at Standard Chartered Plc in Jakarta. ``Still, Indonesia is now a gas country'' and the government needs to encourage more investment in the gas, coal and mining industries.
Production Peak
Crude oil has doubled in the past year to reach a record $135.09 a barrel in New York on May 22 as demand growth outstrips supplies and the dollar weakens, prompting investors to buy commodities as an inflation hedge. Oil was at $126.80 a barrel on the New York Mercantile Exchange at 5:22 p.m. Singapore time.
OPEC Secretary General Abdalla el-Badri had no immediate comment.
Indonesia's daily crude output has fallen below 1 million barrels since February 2004, according to Bloomberg estimates. Production probably fell 0.9 percent to 859,853 barrels a day in April from March, oil and gas regulator BPMigas said April 29.
``If production comes back to give us the status of net oil exporter then we can go back to OPEC,'' Purnomo said at the Jakarta Foreign Correspondents Club today.
Fuel-Price Increase
Indonesia produced an average 883,000 barrels of crude oil a day in 2006, while its consumption of refined oil products that year was 1.061 million barrels a day, according to the latest edition of OPEC's Annual Statistical Bulletin.
The country's oil production peaked in 1977, at 1.686 million barrels a day, according to OPEC.
Indonesia raised fuel prices by almost 30 percent this month to reduce the government's subsidy burden of capping pump prices. Without the increase the government may have to spend 190 trillion rupiah ($20 billion) this year, more than the 126.8 trillion rupiah it had budgeted for 2008, before next year's general election.
``This move really plays to the domestic audience,'' said Tony Regan, an energy consultant with Nexant Ltd. in Singapore. ``How can they show concern about domestic oil prices and expect people to pay more at a time when they are also part of an oil cartel that is trying to push prices up.'' |
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3YGyTFi6y4g&refer=home
Presumably, exports will decrease to meet domestic consumption as a result of this move. This has ramifications for Japan and South Korea, who are importers of Indonesian energy. With monetary inflation already very high in SK this could drive energy prices up and with them food and the prices of consumer goods in the short term and has a dramatic impact on Korean energy security. |
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