Subject: JP: Increase in Oil Prices May Prompt Smuggling

The Jakarta Post

Monday, June 14, 2004

Increase in Oil Prices May Prompt Smuggling

The Jakarta Post, Jakarta/Batam/Surabaya/Kupang

State oil and gas company Pertamina has warned of a possible rise in the smuggling of fuel out of the country as the recent increase in oil prices has widened the price gap between fuel sold domestically and in neighboring countries.

"The price gap has widened so smuggling activities could be on the rise if fuel prices in the country are not increased," Rachmat Dradjat, deputy director for fuel products marketing at Pertamina told The Jakarta Post recently.

The fuel is mostly smuggled to neighboring countries such as Singapore, Malaysia and East Timor, while the type of fuel most prone to smuggling is kerosene, automotive diesel fuel and premium gasoline, according to Rachmat.

Fuel costs are cheaper in Indonesia than those countries due to the government's subsidy.

"We can detect smuggling activities from an unusual rise in demand for oil-based products in certain areas," Rachmat said.

East Nusa Tenggara Police chief Brigadier Gen. Edward Aritonang confirmed that smuggling basic commodities including fuel products to East Timor has been increasing.

Fuel smuggling is particularly prompted by the high fuel prices in East Timor which reaches the equivalent of about Rp 10,000 a liter (US$1.075) compared to an average of Rp 2,000 (21 U.S. cents) per liter in the western part of Timor island.

"If fuel smuggling continues, there could be fuel shortages on Indonesian side of Timor island," Edward said.

According to Edward, the smuggling involved residents living along border with East Timor, but the Indonesian and East Timor police had stepped up efforts to curb it.

However, Pertamina's Marketing Division V which oversees fuel distribution in East Java, Bali, East Nusa Tenggara (NTT) and West Nusa Tenggara (NTB) said there had been no fuel shortages in the provinces.

"Demand for oil-based products for both industry and consumers in the three provinces has remained relatively stable in the first semester of this year compared to 2003," Asep Aonuddien, spokesman for Pertamina Marketing Division V, told the Post recently.

In Batam, which shares sea borders with Singapore, Pertamina also reported no fuel shortages.

"Fuel supplies for industry and household use have been running normal," Irto Petrus Ginting, spokesman for Pertamina's Batam marketing unit, told the Post.

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