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Gasoline Price Hike


I’m planning to release this article on the eve of 1st of October when the government ‘enforce’ their policy to increase the price of gasoline in this country but since there are already many blogs out there that released this kind of entry, there’s no point on waiting then right?

I am probably a minority on blogosphere that rejects the gasoline price hike. Most of them agree with it with various reasons:

  • Mainly the rich enjoyed the subsidy given by the government
  • The deletion of subsidy for gasoline will in turn make the people more independent
  • The subsidy can be used on another productive sector
  • To reduce the likeliness of oil smuggling
  • The price in other country is far more expensive
  • Other

    • Throw as many reason as you can and I’m definitely can make a rebuttal out of it to make my stand that I do not agree on government decision to increase the price of gasoline, and I do think that the government is stupid.

    We should start with the first argument that’s pro gasoline hike, “Mainly the rich enjoyed the subsidy“. I have to say that the statement is correct since only the-haves can buy their own vehicles and usually this is the people who drove around town just for the sake of “jalan - jalan”. But for me, there’s a fallacy on the essence of this argument. Indeed mostly the rich enjoyed the subsidy but if we are referring to macroeconomic theory, it clearly stated that any re-calibration on the market equilibrium will creates a new equilibrium.

    And in this case, that equilibrium will also influenced by the inflation that might have caused by the price hike. And who’ll suffer the most by inflation? Of course the lowest chain on the predatorial pyramid which is the poorest of this country. Those rich people will adjust their living-style but they of course will not suffer by this ’subtle’ occurence on economic equilibrium. It is, as I stated earlier, the poor of this country that will suffer the most. Inflation will cause price hike but the income won’t have any significant increase. You do the math based on our previous gasoline price increase on March.

    Plus (this is correlated with the next rebuttal), is there an alternative mean of transportation for the masses if the main usage of gasoline is for transportation?

    “The deletion of subsidy for gasoline will in turn make the people more independent“. Again, this argument is correct but I see a fallacy behind it. Yes the subsidy lift will in turn make our people more independent because they will live in a real-life economy rather than subsidy-based economy as we currently are right now. But does government offer alternative method to substitute gasoline (oil)?

    How about biogas (this might be just as expensive as gasoline as commented on Priyadi’s blog, but I think it will reach a greater efficiency)? How about sun-cell generators? How about any other alternatives that might be implemented on this god-damn country? I’m talking about alternatives here people! It’s just an outright stupidity to release the subsidy without offering the people with an alternatives.

    To add to that, if we assume that the main personal usage of gasoline is for transportation, our government cannot provide a decent mass transportation on any city in Indonesia. Sure Jakarta has KRL but no self-respecting human will use that transportation if compared to the comfort of a car. Sure Jakarta has TransJakarta but I don’t see it implemented city-wide (at least currently although there’s a plan on expansion). Is there any other alternative? No. On my short trip to Sweden not so long ago and to the rest of western europe so long ago, I found that the government gave alternative to their people to use bycicle as transportation method by providing sidewalks for bycicle. Now does the government provide an alternative?

    “The subsidy can be used on another productive sector“. This is true, but does the government has a concrete and real plan about this? As far as I know that the government will pretty much likely using the surplus of the subsidy release to pay the debt. Our own RAPBN even structurized as more than 40% to pay the debt and only under 10% that goes to public’s sake. It said pretty much because the result of March’s gasoline price hike is around Rp100 Trillion ++ and just small amount of that goes to the public real sector.

    “To reduce the likeliness of oil smuggling“. No rebuttal on this because it will. Plus, our navy isn’t strong enough to provide a total blockade for this smuggling activity. All I can do is suggesting the government to investigate and sue the actor behind the smuggling. I don’t believe that smuggling this big only involving mediocre employees.

    “The price in other country is far more expensive“. For a full list of oil comparation between countries you can visit this site. I tell you this, it is a complete stupidity to compare those price list between countries because you won’t get apple-to-apple comparison. There’s another variable that must be included in the comparation which is GNP (or is it GDP..? Time to open the book…). It is just logic that the higher the people earn, the more they can afford to buy things. To make it simpler, let’s just look it this way, the people in Holland (which has the highest gasoline price compared to the other) can afford 13155 pieces of BigMac while Indonesian people could only afford 405 BigMac (this is based on 2003’s GNP assuming that the price of BigMac is $2). Now you see where I’m going?

    To conclude them all, it is a stupid move made by the government to increase the oil price now. Yes, there are improvements on law-enforcement side but the economy and business side of this country is still clouded with greater uncertainty.

    Funfact:

  • The cash subsidy for the poor is a stupid idea IMHO
  • The government has not fully realized their promise on infusing the subsidy release elsewhere on March price hike
  • Current price hike also haunted with the avian influenza pandemic just like when it did on March. My friend, who happened to be a chicken businessman - chicken wholesaler, said that the avian influenza is just a diversion made by the government because up until now there’s an unlikely connection between the death and the cause of deat, at least that’s what he said.
  • My main reason on switching to Betrix is not gasoline price hike. It’s an environmental-based reason and I also need the money to start my business
  • If you happen to have other arguments pro-price-hike, please let me know so I can make a rebuttal out of it
  • This article doesn’t discuss the financial impact made by the government. Probably I’ll make a post about that later
  • Moreover, this doesn’t meddle with the impact that might have incured on the government side, I’m talking about the people who will suffer from the price hike.
  • The delayment (or cancellation) of the subsidy release will indeed adding more burden to the government’s cash flow
  • And for the sake of the search engine: Tolak Kenaikan BBM! Tentang Kenaikan BBM! Harga Kenaikan BBM!

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    September 27th, 2005
    17 Responses
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    Reader Comments

    Comment Number:
    1
    Written by:
    Priyadi
    Posted on:
    9/27/2005 at 7:38 am

    you don’t address the ultimate argument against keeping oil subsidy: it is a non renewable energy source. arguing subsidy from economic perspective is a moot point, if the energy itself won’t be economically viable within several decades. the peak of world’s oil production is predicted to happen in next year. and indonesia (and iran, and north sea) is already past its peak.

    btw, http://www.newyorker.com/talk/content/?050926ta_talk_surowiecki from your asides is a nice article, you should read it :) it seems the situation there is similar to ours :)

    Comment Number:
    2
    Written by:
    Priyadi
    Posted on:
    9/27/2005 at 7:44 am

    from the article:

    Let’s hope they keep thinking. While a gas tax cut looks like a panacea, it’s more like a placebo. … What we need now—as even President Bush, hardly a conservationist, has said—is for people to drive less, not more. And that means paying more for gas, not less.

    and more:

    The other, more fundamental virtue of the gas tax is that it brings the price of gasoline in line with its true cost. When all is said and done, cheap gas is an illusion, because our reliance on gas creates a whole series of costs that aren’t factored in to the pump price

    more:

    But oil crises are going to keep coming, and each new bout of turmoil will show just how expensive our free ride on gasoline has become.

    these applies to oil tax in the US, but should apply to Indonesia’s oil subsidy as well.

    Comment Number:
    3
    Written by:
    Oskar Syahbana
    Posted on:
    9/27/2005 at 10:13 am

    Actually I have addressed the non-renewable energy subsidy. I’m addressing that on my arguments on government alternatives. Especially the use of biogas. Although indeed the production process of biogas just as expensive as gasoline, I think it is more efficient.

    And about tax (I’ll update my entry later), how can you guarantee that the summed ammount of tax will be allocated to oil subsidy?

    Comment Number:
    4
    Written by:
    difa
    Posted on:
    9/27/2005 at 11:28 am

    alternative for oil/gas campaign was done by government a long time.
    Search it

    but, again- Indonesia people have been too spoiled ’cause of low gas price (include me!)

    Given all this, what is to be expected more ?
    be optimist not pessimist, for gasoline hike will make our lovely Indonesia much better.
    Believe our leaders. if we don’t believe any more..who else?.

    i think you should write detail about alternative gas campaign.

    Least, not last, imho never say ;
    “a minority on blogosphere that rejects the gasoline price hike”
    we are one!

    Comment Number:
    5
    Written by:
    Oskar Syahbana
    Posted on:
    9/27/2005 at 11:47 am

    @difa: It was done but never offered. Like biogas, the gov’t never gave incentive for gas station to have their own biogas pump. Gov’t never gave incentive to people by ruling a price to make the tax for bio-gas powered vehicle lower than those of gasoline. They might have done some research for an alternative energy, but do they offered it as alternative? No!

    Yes, I’m optimist that the price hike will make our nation even stronger, but increasing the price now will not do the people any good. Alternative, gave us an alternatives!

    Well I always believe that in blogosphere everyone should be entitled for their own opinion. There are many kinds of people publish their thoughts everyday and there will be division on how those people view the world. I’d say that there’s quite a lot of POV around blogosphere which in turn make it rich in diversity (which is always a good thing). I’d say that blogosphere is not one, but we are not divided either. It’s more like a placebo rather than a panacea.

    What do you think of that?

    Comment Number:
    6
    Written by:
    Priyadi
    Posted on:
    9/27/2005 at 11:47 am

    And about tax (I’ll update my entry later), how can you guarantee that the summed ammount of tax will be allocated to oil subsidy?

    no, i’m not suggesting that we tax gasoline. what’s the point taxing and subsidizing simultaneously?

    Actually I have addressed the non-renewable energy subsidy. I’m addressing that on my arguments on government alternatives. Especially the use of biogas. Although indeed the production process of biogas just as expensive as gasoline, I think it is more efficient.

    biogas & ethanol won’t sell if it is way more expensive than gasoline. note that I don’t oppose subsidy on alternative and renewable energy sources, if only to encourage the use of them. we don’t have any choice but to gradually stop subsidying petro oil. not doing so is against law of nature. it is inevitable that petro oil will get depleted sooner or later, and there’s absolutely nothing we can do to change that.

    Comment Number:
    7
    Written by:
    Oskar Syahbana
    Posted on:
    9/27/2005 at 11:55 am

    @Priyadi: No, I’m not talking about taxing the gasoline. I mean taxing other taxable cashflow.

    Yes true and I’m absolutely agree with that. The problem is, the government in this country does not give any other alternative. They don’t give alternative for fuel, they don’t give alternative for other means of transportation, they even planned on allocating the subsidy by giving cash money to poor people which I believe is prone of corruption.

    Our government may have made progress on enforcing the law but law without progressive economy will return to it’s previous state, corrupt.

    Comment Number:
    8
    Written by:
    Priyadi
    Posted on:
    9/27/2005 at 1:58 pm

    on the other hand, subsidizing oil is also prone to smuggling :). these are two different issues here: energy crisis and law enforcement. i believe they can and should be solved in parallel. we won’t be fixing our energy crisis problem ever if we had to wait until law enforcement issue is resolved :)

    Comment Number:
    9
    Written by:
    agusset
    Posted on:
    9/27/2005 at 2:58 pm

    I have a question (actually this is an old question in my head when everybody talk about subsidy, that I can’t found any good answer till now): what are the reasons, at that time, so the government gave a lot of subsidy to the Indonesian people? Is there any document mention about it? IMHO, the government, at that time, should has a program how subsidy should be and when the subsidy deduced by time.

    IMHO, the most reason now why gov cuts the subsidy is because of the price! Unrenewable energy issue and development program are not the main reason to cut the subsidy. So why I am pessimist!

    I agree that subsidy should be deduce by time, but with good reasons and good development programs, not just a stupid reaction!

    Comment Number:
    10
    Written by:
    Oskar Syahbana
    Posted on:
    9/27/2005 at 4:23 pm

    @Priyadi: I haven’t found any rebuttal against this oil smuggling (which you can read on my post in the first place). It’s not sustainable to provide a nation-wide blockade at this current because our navy doesn’t have enough resources to do that. But I also believe that the government should trace and investigate the actor behind the screen on our recent oil smuggling vendetta. I’m positively sure that the actor is a high profile Pertamina’s management.

    @Agusset: Well, I can’t put it any better than you. And I also agree with you that subsidy release should be a gradual and controllable thing, not just a reaction for a high oil price increase.

    Comment Number:
    11
    Written by:
    kusaeni
    Posted on:
    9/27/2005 at 5:53 pm

    asal subsidi nya tepat sasaran saja …

    Comment Number:
    12
    Written by:
    Rendy Maulana
    Posted on:
    9/27/2005 at 7:14 pm

    udah… naek sepeda ajaaaa…

    sehaaat.. :D

    *jok sepeda gw gag enak nih… *

    tuker jok baru aaah…

    Comment Number:
    13
    Written by:
    Oskar Syahbana
    Posted on:
    9/27/2005 at 9:23 pm

    Ya… gw sendiri sudah naik betrix :P

    Comment Number:
    14
    Written by:
    Benny Chandra dot com » Menaikkan Harga BBM dengan Damai
    Posted on:
    9/29/2005 at 5:41 pm

    [...] Akhirnya gw ikutan juga nulis soal kenaikan harga bahan bakar minyak (BBM), menyusul rekan-rekan blogger lain yang sudah melakukannya kemarin-kemarin. Padahal keinginan menulis soal BBM ini udah coba gw abaikan beberapa hari belakangan ini… he he he [...]

    Comment Number:
    15
    Written by:
    abc-oil.info » Blog Archive » Permagnus.com | Gasoline Price HikeIt said pretty much
    Posted on:
    5/10/2006 at 4:13 am

    [...] Permagnus.com | Gasoline Price HikeIt said pretty much because the result of March s gasoline price hike is around Rp100 Trillion ++ and just small amount of that goes to the public real sector. To reduce the likeliness of oil [...]

    Comment Number:
    16
    Written by:
    rupal maheshwari
    Posted on:
    6/21/2006 at 9:28 pm

    i would point to the effect on the lower class of the society with out being a part of it they would be adversely affected.

    Comment Number:
    17
    Written by:
    nory
    Posted on:
    4/24/2007 at 10:44 am

    thanks a lot…because from this page, i can find some information for my debate topic