Indonesia will no longer be member of Organization of Petroleum Exporting Countries (OPE). Since 2004, Indonesia has stopped being the world’s oil net exporter. Unless Indonesia can find new oil fields, Indonesia’s chance of rejoining is slim. Thank God!
The implication of Indonesia’s resignation from OPEC is huge. However it can’t be said to be 100% negative. On the down side, Indonesia is off this super exclusive club, consisting of only 13 countries. Furthermore, Indonesia can no longer brag about being the only East Asian country to join OPEC. However, the resignation is a blessing in disguise.
As an organization OPEC can be categorized as Oligopoly. OPEC has rights to control oil exporting price of its member countries. With control of 80% of the world oil production, OPEC virtually controls the world oil price and production. OPEC can determine how much production its member countries make. In 2007, non OPEC countries and the UN ordered OPEC to increase its production with growing concerns of skyrocketing oil prices. OPEC selfishly declined.
Indonesia is the only country not to capitalize on rising oil prices. The reason for that is Indonesia’s production no longer suffices its own domestic needs. With aging oil reserves and unfruitful exploration Indonesia imports more than it exports.
If Indonesia’s domestic oil needs is huge, than why do Indonesia export its oil abroad? Again, OPEC has the right to sanction member countries if they can’t produce uninterrupted supply of oil for export. With Indonesia soon to terminate its membership, Indonesia can focus on meeting its domestic oil needs. Indonesia can still rely on other exports such as natural gas.
Despite all that, Indonesia’s to do list is very long. The first thing the government must do is to attract foreign investment. Foreign investment is needed if Indonesia were to explore its vast archipelago for oil reserves. Indonesia must eliminate all the red tapes and illegal fees if it were to attract foreign investment of any kind.
The next to do thing is to optimize its oil management from production to retail. With high price discrepancy between its subsidized commercial fuel prices and its non subsidized industrial fuel price, oil and kerosene short supply cases is occurring more and more often. There are numerous cases where retailers and distributors sell subsidized fuel to industry. Oil subsidy falls in the wrong hand, and all aspects of society must share the burden.
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