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SPE 00000

THE ROLE OF FUEL SUBSIDIZE, IS IT NECESSARY?


Adri Syawal Syahril, Petroleum Engineering Department, UPN “Veteran” Yogyakarta.

Copyright 2014, Society of Petroleum Engineers.

This paper was prepared for fulfill requirement of SPE Java Scholarship Program 2014.

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Abstrak
Indonesia is one of the countries which are the country's largest oil consumer in the world. Therefore the Indonesian
government gave subsidies to fuel the consumption of the people. Government judging from the macro-economic aspects,
fuel subsidy will provide impact to suppress the rising cost of producing goods and services that use the fuel, such as home
industry, manufacturing industry, service companies, transportation .

Introduction Even the oil reserves we currently have


Our childhood surely we have been only live 4-6 M barrel, morbidly discovered new
bombarded with the "fairy tale" how rich our oil reserves, a few years from now we might be just
country maybe this is the reason way country, could be an oil importer. Because we have run out
which makes us complacent and lazy, and we of oil. Therefore before it's too late let's conserve
become a nation that is wasteful in the use of fuel since now.
natural resources. But is it true that we are so rich
?? Not beneficial fuel subsidies
How would we saving fuel if the price is
When viewed from the SDA which is still affordable and cheap ??
assessed as (oil, gas, coal, and timber) Indonesia is Just take a look this simple conversation,
exclude the country in the list of top 10 richest
countries. We are still far less than even the Q: How would we saving fuel if the price is still
chaotic state again that is Iraq. Especially if it is affordable and cheap ??
compared with Russia, the US, Canada, and Saudi A: Yes, you’re right, we are still the cheapest price
Arabia. Come on guys, let's wake up from a dream, fuel in the local class even the countries of
this nation is not the richest country so let's get up ASEAN. With this condition of cheap price of fuel,
and do not sit idle just because we feel become the society will tend to be wasteful in using the fuel.
richest man. Q: How fuel prices are not cheap if it is still in the
subsidy by the government ?
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A: Absolutely, with our fuel price subsidies are The Government must know the solution
much lower compared fuel prices on the of this problem, but do they dare to bear all the
international market risks if the Fuel subsidy revoked ??? All policies
Ironic isn’t it?? must be had the risk , and the worst effects of rising
fuel prices are rising prices of goods and services

Based on data from the Ministry of AKA there is an inflation, and course of middle-

Energy and Mineral Resources, Indonesia's class economy that most feel the impact of this.

premium price of Rp 6,500 per liter and the price of


non-subsidized fuel or pertamax 92 Rp 10,200 per But if it is not raised,until when we want

liter. But in Burma fuel prices USD 10 340 per liter to live with a mouthful of subsidy ?? When will we

and are not subsidized, Thailand by Ron 91 sold Rp be independent?? Do not treat us with consumer

12.453 and not subsidized, Ron 92 in Philippines subsidies, but give us a productive subsidies. It is

sold Rp 12 147 per liter and are not subsidized, time that the Government revoke consumer

Laos Ron 87 in the selling price of USD 13 395 per subsidies and replacing them with productive

liter and not subsidized, then in Cambodia sold Rp subsidies.

13 298 per liter and are not subsidized,


Based from rri.co.id

Why Gas Station always have the call for energy- “KBRN,Jakarta: In the Draft State Budget (Budget)

efficient banner ?? for 2015 delivered by President Susilo Bambang

Why they made the limit that they’re sell,If we buy Yudhoyono (SBY) in the presence of the Plenary

a lot,the government actually gain lot of profit Session of the House of Representatives, Friday

right?? (15/08/2014), asking the government subsidy

Why the fuel must be subsidies by the govervent?? totaled Rp 433.512 trillion (T), up to Rp 30.476 T

And a million words of “why” is approached us compared to the number of subsidies on the 2014

regarding this right?? revised budget. Of the total subsidy of Rp 433.512


T, most of the energy allocated to subsidies of Rp

Here’s the deal 363.534 T, which is composed of fuel subsidies,

Just call it a subsidy, the more we are wasteful the biofuels, LPG 3 kg, and LGV Rp 291.111 T, up to

fuel,then the subsidies will be driven up and we're Rp 44.617 T compared to the revised budget in

getting loss, got it?? 2014, while electricity subsidies Rp 72.422 T, down

the more we continue to sell then we will continue to Rp 31.393 T compared APBNP2014”

to loss, so the more you buy, the more we loss.


Simple right? Simply, every year we give subsidies 250

Then how the solution ??? T, and the value is always going up every year with

The most easy and simple yes, raise fuel prices that amount does not make our lives better but

gradually until it reaches real price, I expect the instead make us a nation wasteful fuel. Effects of

government revoked the fuel subsidy gradually spoiled are we complacent and even more spoiled.

But the simple and easy solution is of course not The more you wasteful expenditure of our national

something that is easy to do. budget will become swollen, and of course the
national debt will be growing.
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Conclusion professor, child factory workers could successfully


With Rp 250 Trillion subsidy fund each become engineers and other wonderful stories
year what we can do for the betterment of this
country ??? To reduce the adverse effects of fuel 2. We can build a bridge of at least 4 Suramadu
price hike on the poor segments of society, the class each year.
government can give a BLT for 5 months to the Construction of longest bridge in need of
heads of poor families, within 5 months is expected funds Rp 5 Trilliun, with funds Rp 20 Trilliun we
that they can immediately adjust to inflation. We can construct four bridges in this class every year.
assume there are Rp 10 million poor households, Even a short strait bridge slowly can be met, and if
with BLT 500 thousand per head of family for 5 we want to give priority to build a bridge over the
months needed funds Rp 25 Trilliun, expected BLT river, it is guaranteed a 10-year course of all the
on target and little deviation, if this step has been people we will never see Tarzan bridge and a
successfully, worst effects of the fuel price hike is suspension bridge
resolved, then the positive impact of the people will
begin to downsize and is expected to switch to 3. We could build half a million houses with
public transport for their routine activities, thereby affordable price each year.
slightly reduced congestion and pollution.
The government could build a cheap
Other positive effects ?? house with 500 thousand budget Rp 80 million per
piece, and to the government only needs to fund 40
The government's first year has funds Trilliun, not a huge amount compared to the
remaining Rp 225 Trillion, and the following year amount of subsidy, the installment payment
there were Rp 250 Trillion of postal funds that we without interest on the condition only for those
can divert subsidies for development for the earning under 4 million a month. Within 10 years
welfare of the people. the poor have certainly been many who have their
With Rp 250 Trillion what can we build ?? own home, clearly the positive impact we would
need hundreds of thousands of workers and
1. Free education from kindergarten to college. because this project takes place every year so we
Based on my calculations simply by Rp 50 can import labor from abroad, so in Indonesia no
Trillion per year we've been able to eliminate the longer unemployed.
cost of education. Of course this is good news for
us who are in the lower middle class. We can focus 4. There is an additional 385 km of highways every
on working to meet the needs of our lives and are year.
no longer puzzling over the cost of the education.
There will be no more stories of children who have Only with Rp 30 Trillion assuming each
to drop out of school because they are poor. km we need 78 M, it will be is built 385 km of
highways every year. Imagine how easy transport if
And our media will be filled with stories of success Jakarta, Semarang, Solo, Yogyakarta, and Surabaya
stories, the rickshaw drivers child becomes a is connected by toll road, amazing isn’t it ??
doctor, construction laborers of child became
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Not until 5 years of the city's major cities will be


connected by motorway with funds outside of
official funds in the state budget.
And of course next year's funds could be used to
build a toll road on the other islands.
Because the project is ongoing so you can imagine
how much labor will be absorbed ???

5. The non-interest financial aid of 100 million


dollars per head to 100 thousand UKM.
By setting aside 10 Trillion per year, we
can help our UKM 100 thousand per year with
interest-free credit. Imagine how advances in our
UKMs if this happens ??
Obviously there will be no unemployment in this
country, and many more that can be done with the
funds.

Remember this is not just a dream guys,


all of this can happen if we dare, dare to bear all the
risks by unplugging the fuel subsidy. One word
“Abolition”. Abolition of fuel subsidies at all costs
and divert the subsidies in sectors that are positive
for a better Indonesia. Let our generation sow its
difficulty, but it is our children who will reap its
sweet result.

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