Middle East Crisis and the World Oil

Wave action demonstrations and political crisis that has plagued the Middle East has pushed world oil prices. London Brent oil price which is used to trade in Europe have shot above $ 100 per barrel. Difficult denied that the Middle East region is the most important areas related to the world’s oil. The majority of the world’s oil producing countries belonging to the Organization of the Petroleum Exporting Countries (OPEC) is derived from the conflict-ridden region.

Egypt is known as controlling the Suez Canal. It is estimated that approximately four percent of world oil is channeled through this canal. In addition, Egypt is also included major oil-producing countries of the world, high population tetepi require most of the production is allocated for domestic needs.

What about Libya? According to the report British Petroleum (BP) in 2009, Libya’s largest oil exporter country menerupakan 12th in the world. In addition, Libya is also listed as the owner of the source country’s largest oil reserves in Africa. Some of the world’s major oil companies operating there, such as Repsol (Spain), BP (UK), Shell (Netherlands), Gazprom (Russia), Statoil (Norway), and Medco (Indonesia).

A wave of demonstrations and political crisis has caused most of the oil companies in Libya announced to withdraw their foreign staff. In fact, in an escalation of tensions has made some Libyan oil wells closed. So, it is clear that the political turmoil the Middle East currently has a direct contribution to the increase in world oil prices.

The impact to Indonesia

Spike in world oil prices would have a serious impact on the national economy. If world oil prices continue to be above the level of USD100 per barrel, then the burden of State Expenditure Budget (APBN) will automatically increase the state subsidies given to oil fuel (BBM) is still quite high.

Assumption Indonesia Crude Price (ICP) in the state budget in 2011 is $ 80 per barrel. Budget balance is disrupted by the spike in world oil prices sooner or later it will bring negative impact on national economic performance.
There is no other way, to minimize the negative effects of oil price hikes due to world governments need to promote the efficiency of fuel consumption. So far, reality often shows that the increase in fuel consumption was not significantly promote economic growth. Fuel prices are cheap because of government subsidies supported suspected as one of the main causes of inefficiency of fuel consumption. Criticism of the fuel subsidy policy was increasingly tight sound.

According to the Ministry of Energy and Mineral Resources, in 2011 the fuel subsidy is estimated at Rp92, 8 trillion or an increase of the subsidies last year only amounted to Rp88, 9 trillion. In 2010, about 60 percent of the subsidy is absorbed by the premium and more than half of that enjoyed by private car users. The fact that most pathetic of the policy is 25 percent of households with the lowest incomes per month just to receive the allocation of subsidies by 15 percent. Meanwhile, 25 percent of households with highest income per month receive a subsidy allocation of 77 percent.

Waste problems and inaccurate targeting budget subsidy allocation is always haunt Indonesia. We never seemed to be pulled out of oil. It was not fair if the current government to mess around with world oil price hikes, but at the same time the fuel subsidy funds were actually more enjoyed by the community can afford.
Therefore, it takes courage to reduce the allocation of government subsidies. Settings subsidized fuel is one option that can be selected by the government in addition to raise fuel prices. Through this policy of subsidized gasoline (premium) should only be consumed by public vehicles and motorcycles. While private cars are required to use fuel nonsubsidized (pertamax) at a price more expensive than the premium.

Restriction scheme of subsidized fuel is an alternative policy that is less risky than raising fuel prices that potentially cause economic distortions. Almost certainly will arise many negative responses when the government raised fuel prices at this present moment. today. However, it should be remembered by the government that the choice of limiting the options of fuel consumption must be accompanied by a commitment to managing the supply of fuel.
The Government must build a healthy investment climate in the oil and gas sector. The government should consistently trying to maintain the supply of and demand for domestic oil. Increased national oil production is accelerated by coupled energy consumption savings and diversification.

Bawono Kumoro
Researcher of The Habibie Center and Member of Indonesian Society for Middle East Studies

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