Indonesia’s gasoline consumption has dipped only 5 per cent since Jakarta raised prices by a third, officials say, highlighting the difficulty in tempering demand even in poorer nations.
Oil prices have fallen this week partly because traders fear that rising retail prices in Asia – where some governments are being forced to roll back subsidies due to soaring crude prices – could begin to cut into robust demand growth.
While Indonesia’s daily gasoline consumption fell to around 53,000 kilolitres (333,300 barrels) a day, equivalent to about 3 per cent of US gasoline demand, Pertamina marketing director Achmad Faisal warns that it could quickly recover.
“We expect daily gasoline consumption to rise next week, because we believe more motorists will go back to pump stations to fill their cars or motorcycles,” Faisal says.
Even after the sharp rise Indonesia’s petrol is among the cheapest in Asia due to heavy subsidies. China and India have also resisted passing on rising global prices, giving drivers little reason to cut back on travel.
Analysts question whether the latest round of price rises will be very effective in tempering oil demand growth. The rises are either too small, such as India’s likely 5 to 10 per cent increase this weekend, or in countries like Sri Lanka, whose oil consumption is too small to have an impact on the market.
Indonesia’s demand is particularly important in the Asian market, as it is the region’s biggest importer of gasoline and diesel fuel. In October 2005, when Jakarta more than doubled pump prices, consumption fell by about a fifth overnight, causing a build-up of domestic stocks and weighing on prices.
Faisal says Pertamina’s daily oil products stock had stood at 17 days, below their 20-22 day target but were not yet indicating a serious drop in demand.
Separately, another Pertamina official, who declined to be identified, said the company would increase oil product stocks to 18 days of consumption.
“Seventeen days’ stocks are enough to secure consumption and there is no need for extra imports of gasoline because Balongan refinery has returned to normal production,” the official says.
Pertamina’s Balongan refinery is running at full capacity after it shut down its 83,000 barrels-per-day gasoline-making unit due to an outage.
Indonesia is importing 12.01 million barrels of oil products for June, down from 12.72 million barrels bought for May.
Indonesia raised fuel prices by almost 30 per cent last month, sparking angry protests in a country where millions are already feeling the brunt of the rising cost of food.
President Susilo Bambang Yudhoyono says his government had no choice but to raise fuel prices to avoid a crisis similar to the 1997-1998 economic meltdown that crippled the south-east Asian country.
