Subsidy and energy security

Erkata Yandri

Erkata Yandri

Finally, the government showed courage to raise fuel prices. We all knew, this was an unpopular decision in the wrong momentum. Simply reason; to nourish the state budget. If the government does not do something more serious and more fundamentally related to oil, the consumption of subsidized fuel in 2013 is predicted to increase, more than 50 million kilo liters (kl).

The fact is clear, the consumption of subsidized fuel is increasing from year to year. For the year 2012, fuel subsidies reached Rp.274, 7 trillion, consumed 45.27 million kl of fuel. If crude oil prices and dollar exchange rate fluctuation, as usually all the officials of this country will panic.

Actually, government has long warned by various parties. The difficulty in controlling the consumption of fuel subsidy is the subsidy itself. Due to lack of control without decisive action, causing people more rational. “Why should I buy more expensive oil if there is the cheap one?”

In fact, about 70-80% of subsidized fuel is wasted through vehicle exhaust, which is owned by the rich. While the rest are enjoyed by the poor. Wasteful behavior is caused by low fuel prices. If not changed, this country will always be mocked by the uncertainty of future oil prices.

The question is, can we rise from this uncertainty to be secure in energy?

Misguided Mindset

For national energy security, Indonesia actually is not shortage of smart people and idealists in formulating the appropriate energy policy. Unfortunately, this country has also been marred by three misguided mindset.

First, misguided mindset that use public money to boost the popularity ahead of the presidential election. Although all parties were cautious, but all of them want to get good rating from the people. Finally, direct social assistance (BLSM) as solution. Very clear, BLSM is not a fundamental solution for energy problem. Fuel subsidy has become “commodity, ridicule and jokes”.

If the misguided mindset is still maintained, until the end of the world, do not expect that the major energy issues will be resolved. Are we aware of this situation?

Second, misguided mindset which assumes that Indonesia is rich in oil. Thus, the oil should be consumed at a low price by all parties. If necessary, free of charge until finish. In fact, there are some people who think that oil prices are still expensive as well. So there is a desire to tamper with economic price.

Then, there is also assumption that oil as a natural resource, easily purchased on the world market. Apparently, we are so confident with the strong economy to be able to import oil at high prices. Logically, the oil reserves in the world has declined, while consumption is increasing. Not many people are aware that Indonesia’s oil balance deficit since 2002, so became the net oil importer. According to data from British Petroleum in 2012, estimated Indonesia oil reserves is only enough for 12 years, while the world for 54 years.

Third, misguided mindset which assumes that rich people is if own car. Government supports this with dumb policy, like the cheap cars. Of course, it is contrary to the spirit of developing alternative energy and energy diversification.

Moreover, government does not have a proud achievement in development of public transport. Look, the condition of public transport which is very uncomfortable and unsafe. So it’s not surprising that vehicle ownership increases rapidly. In 2011, car sales reached 894,164 units and rose to 923 132 units in 2012. It is estimated, in 2013 will penetrate 1.1 million units. Moreover, low-cost car market is very lucrative. It’s clear who is very advantaged in this issue.

Do we realize the effects of the misguided mindset, which is very vulnerable to oil price volatility at any time?

Unserious Action

However, we must also admit honestly, actually there are a few things that have been and are being taken by the government in terms of reducing energy consumption and subsidies.

For example, energy savings program. The government has three times promote the program, such as by issuing Presidential Instruction No.10/2005, Presidential Instruction No.2/2008, and Presidential instruction No.13/2011. Unfortunately, these three programs are still implemented in limited scope with no apparent results. Perhaps, that is why the government has not confident doing the program nationally.

In addition, there is also the fuel to gas conversion program. Unfortunately, until now the technical implementation is not clear yet. Apparently, we are still have to wait for the melting deadlock coordination. Also, the factor of non-existence of “role model” is very influential. There are no national figures who dare to give example. Instead, they are competing in the luxury car ownership, which is obviously wasteful of energy. This is the proof of their ignorance in promoting gas conversion program. Finally, we all got stuck into the polemic “chicken and egg” or “wait and see”.

Hopefully, there is still progress in the development of electric cars, combined with alternative energy. Electric cars can be powered by batteries charged by solar cells. In addition, the electric car can also be driven by fuel cells and hydrogen, which can also be produced by electricity from solar cells. Just a rough calculation, one square meter of solar cells can generate power of 100 watts.

Today, household electricity is still supplied from PLN, generated from burning oil, gas, and coal. Possible in the future, every house is mounted solar cells for the vehicle itself. This is the economic potential, such as employment of the industrialization of solar cells, also to save foreign exchange.

Commitment to the energy independence

Keep in mind, reducing subsidies or raising fuel prices, does not solve the problem. Instead, to be paid by the high political and economic costs. In this case, we need a fundamental solution. If the government consistently to nourish the budget, government should also avoid the inefficiencies projects, one of the sources of corruption. Indonesian Forum for Budget Transparency (FITRA) reminds leakage budget 2013 reached 30% ahead of the 2014 presidential election.

In addition, the subsidies must be allocated for the benefit of people, such as developing infrastructure, education and health. Then, government should also undertake the programs of energy saving, energy conversion, and renewable energy. To succeed, national figures in the bureaucracy and the parliament should demonstrate their commitment being energy role model in daily activities.

We should not give up too soon, despite the fact that the trend of oil production continues to decline, while consumption continues to rise. Think about it! That’s not fair to future generations, if we suck the oil out. With effort and togetherness, not impossible that we are able to balance oil production and consumption. To date, Indonesia’s fuel consumption is 1.3 million barrels per day (bpd), while crude oil production was 900 thousand bpd. That is, 400 bpd must be from the conversion and conservation programs.

So, what we should do now is to eliminate the misguided mindset. There is no point for us to be recriminations, who is slave of capitalism or neoliberalism. Energy security must be achieved with mighty breakthrough, so we can survive and avoid destitution.