ICP has not exceeded fuel price increase requirements: Research institution

The world oil prices in May 2012 have fallen as compared to those in April 2012, therefore the requirement of fuel price increases has not been fulfilled, Komaidi Notonegoro, said.
Jakarta (ANTARA News) - The Indonesian mining and energy research institution, ReforMiner said that the Indonesian Crude Price (ICP) between December 1, 2010 and May 31, 2012 has not exceeded the fuel price increase requirements.

ReforMiner`s deputy executive director, Komaidi Notonegoro, said here on Tuesday that the world oil prices in May 2012 have fallen as compared to those in April 2012.

"Therefore, the requirement of fuel price increases has not been fulfilled," he remarked.

According to Notonegoro, the decline in world oil prices is largely due to a slowing global economy and increasing production, especially in Saudi Arabia.

The average price of world oil, according to West Texas Intermediate (WTI), on May 22, 2012 reached 96.68 dollars per barrel, or lower than the average price in April, which was 103.32 dollars per barrel.

According to Brent`s benchmark, the price fell from 119.75 dollars per barrel in April 2012 to 111.99 dollars per barrel in May 2012.

"ICP price`s benchmark tends to be closer to Brent`s price, so we estimated that the ICP average in the last six months - from December 1, 2011 to May 31, 2012 - is still in the range of 13 percent, or above the budget assumptions," Notonegoro observed.

Article 7, Paragraph 6A of the 2012 revised State Budget Law mentions that "If the Indonesian crude price within a period has increased or decreased by an average of 15 percent in the last 6 months of international oil prices than is assumed in the 2012 Budget Changes, the government is authorized to make adjustments to the price of subsidized fuel and its supporting policies."

The 2012 revised budget has set the ICP at 105 dollars per barrel, he added; hence, the minimum requirement, amounting to 15 percent of the average of six months, is 120.75 dollars per barrel.

In the previous six-month period (from November 1, 2011 to April 30, 2012), the average ICP was 13.4 percent higher than the set assumption of 105 dollars per barrel - or less than 15 percent.

The ICP directly correlated with movements in world oil prices, based on a benchmark calculated using the 50-50 formula of RIM and Platts.

RIM and Platts are two global institutions that publish the world oil price at any given time.(*)