Minister of Energy and Mineral Resources announced on Wednesday(Dec. 23) that the price of premium gasoline will be reduced from Rp7,300 to Rp7,150 per liter, while the diesel oil price will be lowered from Rp6,750 to Rp5,950 per liter.
The reduced prices include government levies for energy resilience funds amounting to Rp200 for premium per liter and Rp300 for diesel oil per liter.
"Through this policy, we are able to stock up Rp200 per liter from premium and Rp300 from diesel. These funds will be used to develop renewable energy in an effort to build national energy resilience," Minister Sudirman Said stated after attending a cabinet meeting here on Wednesday evening.
He further explained that in real terms, the price of premium at Rp7,300 per liter was lowered to its true economic value of Rp6,950, but the government had levied Rp200 per liter, so the consumers would have to pay Rp7,150 per liter.
The same applies to the price of diesel oil, which was lowered from Rp6,750 per liter to its economic value of Rp6,650 per liter. The government has levied Rp300 per liter for resilience funds, and so, the consumers will pay Rp5,950 per liter.
Thus, from the consumers perspective, the price of premium gasoline has been decreased by Rp150 per liter, while the price of diesel oil was lowered by Rp800 per liter.
"Our consideration is that diesel oil is also consumed by industries and public transportation. Hence, we have two objectives: to lower the prices for consumers on one hand and collect energy resilience funds on the other," he explained.
He said this policy will come into effect from January 5, 2016.
"We are giving time to Fuel Refilling Stations (SPBU), distributors, and retailers to sell their stocks first, so that they would not suffer losses. We also give an opportunity to the state-owned oil and gas company to make a system adjustment," he noted.
Said noted that the government had reduced the fuel prices after taking steps to improve efficiency in the last three months.
"Efficiency has been achieved in three components: world crude prices, the exchange rate of the local rupiah currency against the US dollar, and efficiency in oil supply by Pertamina," the minister claimed.
He stated that the three components allowed the government to reduce the prices significantly.
"We have witnessed various policies this year, which have been helpful in creating efficiency," the minister noted at a press conference.
Thus, the government will be able to levy an energy resilience surcharge beginning next year to develop renewable energy. Some Rp300 from diesel oil per liter and Rp200 from premium gasoline will be collected from consumers to build energy resilience funds.
"This years policies are believed to have created efficiency in oil supply. For instance, the policies on the liquidation of Petral oil company and the takeover of Trans Pacific Petroleum Indotama (TPPI) refinery plants that have helped to reduce imports," he said.
It has also received a boost following the completion of Phase I of the Cilacap Refinery Plant that has been successful in reducing imports and stabilizing the exchange rate of the local currency.
In the meantime, Coordinating Minister of Maritime Affairs Rizal Ramli had previously remarked that it was time to reduce the fuel prices even as the government had planned to lower the price of non-subsidized fuel from January 2016.
"I think it is time (to lower the price) as the global energy prices have been falling continuously," Minister Ramli said on Wednesday.
He pointed out that the prices should be reduced for several reasons. Firstly, the energy prices across the world are currently falling, and the global oil prices have plunged to below US$40 per barrel, the lowest in the last 11 years.
The second reason is that while the supply of oil has dramatically increased, its demand has actually fallen as a result of the global economic slowdown.
"The third reason, which is also very important, is the discovery of large oil fields in northern Russia," Minister Ramli stated.
Due to such reasons, the government should have lowered the fuel price in any case.
Meanwhile, legislator Mukhammad Misbakhun has lauded the governments decision to lower the prices of premium gasoline and diesel oil, starting January 5, 2016.
He described the policy as a gift to consumers in welcoming New Year 2016.
According to Misbakhun, President Joko Widodos bold decision should be lauded as it will have a broad impact on the people.
"I praise the governments steps to announce the reduction in fuel oil prices. This is a courageous political decision taken in favor of the people," he noted.
Misbakhun, who is a politician of the Golkar Party, said the decision to reduce the prices of premium and diesel oil demonstrates that the government is heedful to the peoples aspirations.
He argued that the government had taken the correct step in reducing the prices of subsidized fuel oil as it will raise the peoples purchasing power and increase the output of the production sector.
"In macroeconomic terms, it will boost national economic development," he added.