OPEC did indeed cut oil production, but demand decreased even more severely, especially in Asia. The following article is about Indonesia's economic problems and is an extreme example of how the loss of value of a country's currency causes oil prices to rise, even though they are dropping in our country. This means GRNO's waste oil plants still have a market in foreign countries, if financing can be arranged.
Indonesian minister says fuel cost cuts to proceed next year
nando.net
Copyright c 1998 Nando.net
Copyright c 1998 The Associated Press
SINGAPORE (September 14, 1998 11:37 a.m. EDT
nandotimes.com) -- Indonesia's energy minister
said Monday his country will scrap controls on
domestic fuel costs by next year.
"We've decided that the subsidies should be lifted,
and we're studying how the gradual process of this
can take place," Mines and Energy Minister Kuntoro
Mangkusubroto told reporters after addressing the
Asia-Pacific Petroleum Conference. "But for sure, it
will start next year."
A rise in fuel prices earlier this year helped spur riots
and protests that gained widespread support,
eventually forcing President Suharto to step down in
May.
Domestic subsidies have been a major obstacle in
reforming Indonesia's state-dominated oil and gas
sector in line with other industries, and the
government is seen walking a tightrope between
reform and further upheaval.
"We haven't come up yet with a final scheme on how
to do this, but the decision has been made," he said.
"So starting next year we're going to give up the
subsidies, bit by bit, in a fairly systematic way."
Kuntoro said the changes would be a "very slow
process" because of the precarious state of
Indonesia's economy. Asia's financial troubles have
hit hardest at Indonesia, triggering the country's
deepest economic crisis in decades.
During his speech opening the conference, Kuntoro
conceded that at present "greater emphasis is being
placed on the provision of low cost energy (than
reform), given the adverse impact of the crisis on
both corporate and individual incomes."
But he said the government will revise existing laws
to open the domestic oil and gas sector to full
competition, including the privatization of national oil
and gas monopoly Pertamina.
This broader liberalization in the industry will be
coordinated with the easing of domestic price
controls, he told reporters.
Indonesia's budget is currently heavily burdened with
the subsidies, which account for 16 percent of total
expenditure.
However, oil and gas revenue has contributed a
healthy 33 percent to budget income, according to
Kuntoro. This is partly because such transactions
take place in U.S. dollars instead of the domestic
currency, which has plummeted about 80 percent
since the start of the crisis more than a year ago.
But he warned that Asia's economic malaise is
resulting in a "significant slowing down of energy
demand growth, both in Indonesia and in export
markets in Asia."
The global glut of oil, which has driven the price of
crude so low that the Organization of Petroleum
Exporting Countries cut production by about 2.6
million barrels a day in July, has added to Indonesia's
difficulties. Indonesia is an OPEC member.
By JONATHAN DRAKE, Associated Press Writer
It looks like the dollar price of crude may have bottomed.
oilworld.com
Charles |
