Towards Reallocate Subsidy, Premium Scarcity Drives Prices Up

12/12/2018

Premium—a brand of subsidized fuel marketed by state oil and gas company Pertamina—is increasingly becoming more scarce across a number of areas, and customers are pointing the blame on the government, who plans to cut fuel subsidies, thus effectively raising the prices.

"The rumors of a price hike have been going around for a month now, and Premium is definitely getting harder to find in Bengkalis," said Fazar, a fuel retailer in Bengkalis regency, Riau on Thursday, November 13, 2014.

Retailers of subsidized fuel have begun to sell Premium at around Rp16,000 per liter to reflect the scarcity. "Subsidized fuels are increasingly becoming harder to come by at fuel distributors," said Fazar.

He added customers were willing to queue for more than one hour to buy subsidized fuels, which he sold way above the government's recommended retail price.

In Muara Teweh, Central Kalimantan, Premium is being sold by retailers at around Rp13,000 per liter. "Prices around here are already high to begin with—now with the fuel hike rumors and what not, the prices have rocketed," said Muhammad Iksan from Muara Teweh on Thursday.

The government of Muara Teweh has set the recommended retail price for Premium at Rp7,500 per liter—a threshold that has been breached since the rumors began to make their rounds. "The uncertainties surrounding the government's plan to cut fuel subsidies are hurting customers like us," said Iksan. "Speculators have more time to manipulate prices for their benefit."

That said, other areas do not seem to suffer from high prices due to scarcity. In Tegal, for instance, retailers are selling Premium at Rp8,000 per liter ever since the local government began mulling to issue a ban on purchasing Premium in jerry cans at public gas stations. "Usually a liter costs about Rp7,000," said Sunandar, a roadside retailer on Jl. Jeruk in Pekauman.

Other areas are also trialling novel ways of curbing the sales of Premium—Bangkalan regency in Madura, East Java, is limiting roadside retailers from purchasing more than 60 liters of fuel at gas stations on any given day.

The acting Director General for Oil and Natural Gases at the Ministry of Energy and Mineral Resources, Naryanto Wagimin, said that Pertamina had enough reserves to meet the demand for subsidized fuels across Indonesia. "According to the data we received from Pertamina's Control Room, we still have enough reserves," Wagimin told Tempo on Thursday.

Wagimin went on to assure that technically there were no shortage of fuels, and added that reserves wouldn't be prioritized for any area in particular should a shortage scenario occur.

Wagimin also reiterated that the policy to limit purchases of subsidized fuel by retailers was not an initiative of the Ministry of Energy, and the authority to impose such restrictions lie in the hands of the heads of local governments.

Energy Minister Sudirman Said assured that the government would do its best to meet the fuel demands nationwide. "There is no need for the public to panic," he said.

An energy analyst from ReforMiner Institute, Komaidi Notonegoro, said the restrictions on the purchase of subsidized fuels in a number of areas were put in place to ensure that the subsidized fuel quota of 46 million kiloliters could last until the end of the year. "It was never aimed at stopping the public from panicking due to the planned subsidy cuts," said Notonegoro.

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Towards Reallocate Subsidy, Premium Scarcity Drives Prices Up