Govt to revise oil price assumption

Only two days after delivering the 2006 state budget draft before the House of Representatives, the government has admitted that its US$40-per-barrel oil price assumption was "unrealistic", The Jakarta Post reported Friday.

?Yes, (it is unrealistic). We are open to the possibility that the oil price assumption will be revised accordingly to the latest situation?, head of the Ministry of Finance?s Economic, Financial and lnternational Collaboration Studies Agency, Anggito Abimanyu, said on Thursday

At Tuesday?s presentatlon, President Susilo Bambang Yudhoyono acknowledged that the oil price assumption might be incompatible with the current oil price that tends to move higher and may well be revised in deliberations with the House.?

Anggito argued that the government did not solely base the oii price assumption on current prices ? which hit the $67 barrier recently ? but also on fiscal prudentiality of the state budget.

He said It would be better to put the oil price at its current low assumption and then revise it upwards later on. He added it would be easier to do so than having to cut already disbursed budget allocations resulting from a too high oil price assumption.

?We do not want to put the assumption at, say, $60 a barrel, but then end up with oil price averaging at only $53 or $55,? he said.

?It will be more difficult to retract the allocations.?

The government has earmarked Rp 88.6 trillion (US$8.9 billion) as oil export revenues in the budget draft and Rp 49.3 brillion as revenue sharing to the oil producing regions.

Anggito said the finance ministry would likely propose bo the House a revision of the oil price assumption at $45 a barrel.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said earlier the oil price assumption was based on the Indonesian Crude Price, that currently averages between $50 and $55 a barrel, and will likely average between $40 and $45 next year.

Separately, economist from the Institute for the Development of Economics and Finance (Indef), Fadhil Hasan, suggested that the assumption should have ranged between $50 and $60 per barrel.

?The $40-a-barrel assumption contradicts the real condilion. Local and international research agencies have predictnl that global oil prices next year will not decline to an average of $40 per barrel,? he said in a media briefing.

?The world?s economy will not slow down next year. And oil demand will remain high as economic growth in India and China is estimated to reach 8 percent,? he said.

Fadhil was surprised at President Susilo?s state of the nation address that did not ni~ntion the government?s plan to Lift the fuel subsidy.

?If oil price remains at $60 per barrel and the country?s oil production reaches 1.1 million barrel a day, the fuel subsidy next year is projected at Rp 123 trillion.

?But the budget draft only allocates Rp 68.5 trillion for the subsidy. What will the government do to address this prob would grow by 5 percent next year. (*)