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On their election campaign ad, the Democrat Party, the political base of the incumbent President of Indonesia, Susilo Bambang Yudhoyono, makes a bold statement:

“One of the achievement of the current administration is cutting the (subsidized) fuel price in three consecutive occasion, which never done by any of the previous administration.”

That statement sparks another controversy, with the current opposition party, PDI-P, the base of the former President Megawati Soekarnoputri, who only get less vote to lose her position to SBY (as she said it often, denying the fact that she loses the election to SBY, kinda sore loser, isn’t she? :D). The opposition then claim that the current SBY administration shouldn’t be proud of it and it was not an achievement, but failure instead. That the fuel price cut is inevitable due to the sharp fall of crude oil price within only few months. It is the failure of the government to predict and tackle the soaring oil prices months earlier, which then falling sharply due to slowing demand caused by the global economic recession. In another statement, Megawati even called the SBY administration playing YOYO with the people.

It’s a dilemma dealing with a sensitive matter like fuel prices, especially with subsidized fuel. When the oil prices spiked an all time high of US$ 140/bbl, the cost of fuel subsidy will definitely hurt the national budget, and the government has no other choice than to raise the fuel price in order to save the budget or else, budget will bust out of proportion. Billions of dollars will only end up as smoke rather than allocated for other meaningful spending.

On the other hand, sharp decline of world oil price is beyond expectation, no one can ever predict accurately the rate of decline of oil price. Then it is not entirely correct to say that it is government failure to accurately predict the oil prices. The subsidy, particularly on fuel, will always be political commodity, especially with the election coming up in two months time. Claims and statement by party leaders and government officials will be everywhere on the news.

I always oppose fuel subsidy, one of the reason is because of this issue. Fuel become political commodity rather than economic commodity. If the fuel subsidy eliminated from national budget, the money can be spend on other meaningful sector, like education, healthcare, which in the longer run can be more beneficial for the people. Fuel subsidy only beneficial to those who own vehicles, not to those who really in needs.


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