, pub-9591068673925608, DIRECT, f08c47fec0942fa0 Oil Prices have the opportunity to go up - MEDIA MONITORING OIL AND GAS -->

Oil Prices have the opportunity to go up

Minister of Finance (Menkeu) Sri Mulyani said the opportunity for an increase in world oil prices after the Organization of the Petroleum Exporting Countries (OPEC) decision to cut production is still in the range of 50 percent. Sri Mulyani projected that even if there was an increase in oil prices, it would not have occurred significantly. 

    Sri explained, after OPEC's decision to cut crude oil production by 1.2 million barrels per day to 32.5 million barrels per day (bpd), questions will arise, whether from the demand or demand side, it will match the cuts made.

The former managing director of the World Bank said that with the adjustment of the European economic climate due to Brexit and the referendum in Italy, the demand for oil from European countries could change. Not to mention, the economic policy of the United States (US) under Donald Trump. This means that production cuts coupled with low demand have not been able to significantly boost oil prices.

In general, Sri believes that the Indonesian oil price assumption (ICP) set in the 2017 State Budget (APBN) of US $ 45 per barrel is still relevant despite OPEC's production cuts.

Moreover, Indonesia has chosen to temporarily freeze its membership because it is impossible for Indonesia to participate in cutting production. The Coordinating Minister for the Economy Darmin Nasution said that OPEC's steps to cut production still had to be seen on its effectiveness. 

    The risk from price increases that could occur is of course anticipated by the Government of Indonesia. Bank Mandiri Chief Economist Anton Gunawan added that the potential for an increase in world oil prices still depends on the dynamics of the demand side.

The reason is that US shale gas production continues to overshadow world oil prices, which are starting to rise. He said that when the oil price starts to reach 70 US dollars per barrel, shale gas production may be increased and the oil price will be on hold again. 

    The net increase in world oil prices has an effect on the State Revenue and Expenditure Budget (APBN), especially if the government is consistent with not general subsidies, it will not be affected by the spending side. Mostly in the form of direct subsidies. Hence, with this, there is a windfall game. The only effect might be that if the government increases the price of fuel, it will have an effect on inflation.

Republika, Page-13, Wednesday, Dec 7, 2016

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