Crude oil prices could hit $17 a barrel

Winter in the Northern Hemisphere will end in May 2000, and some oil producing countries in that area will start producing their oil and flood more oil in the world market. And by that time, oil prices, which currently stand at around US$22 and 23 barrel a day, would fall further to $17 a barrel - far below the government's target of $20 in its 2000 budget.

Legislator Pramono Anung Wibowo from the House of Representatives' Commission VIII said oil prices could slump further if members of the Organization of Oil Exporting Countries were not discipline in meeting their oil production quotas.

Indonesia, Pramono said, had interest in keeping oil prices over $20 a barrel, because if it falls below that level, it would burden the government's budget. He predicted that every $1 drop of oil prices below $20 level per barrel would result in Rp 3 trillion in budget deficit.

The 2000 budget has projected a Rp 44 trillion deficit, or five percent of the country's gross domestic products.

If oil prices fall to $17 a barrel, it means that Indonesia's budget deficit would expand to Rp 53 trillion. And therefore, the government would need to seek more loans to cover its deficit in the budget.

Meanwhile, legislator Arifin Panigoro, also chairman of local oil concern Medco Group, said that the government should not be panic and then revise the budget because the fall and rise of oil prices are very seasonal. Besides, OPEC members have been rational, and therefore, when oil prices fall further, OPEC would act and cut production to arrest the fall of oil prices.

Arifin predicted that oil prices would not fall below $18 per barrel. (*)