Gas pumps may face the law if fuel prices skyrocket

21
Anthony Budiawan Political Economy and Policy Studies (PEPS) Managing Director

IO – Petroleum fuel (Bahan Bakar Minyak – “BBM”) sales and subsidy in Indonesia changed significantly since 31 December 2014, which was when Presidential Regulation Number 191 of 2014 concerning the Supply, Distribution, and Retail Prices of BBM was issued. 

On the other hand, regulations and calculations for BBM retail prices are stipulated in the Regulation of the Minister of Energy and Mineral Resources Number 39 of 2014, which was issued jointly with the above Presidential Regulation as its executing decree. This Regulation of the Minister has been amended six times, the latest being on 7 June 2018. 

BBM is divided into three categories: Specific BBM, Specially Appointed BBM and General BBM. “Specific BBM” refers to subsidized kerosene and diesel fuel. “Specially Appointed BBM” is BBM with Research Octane Number (“RON”) 88 or Premium, which is not subsidized and is only sold in specified regions. “General BBM” is BBM with RON above 88, with sales regions left up to the individual petroleum company (Pertamina, Shell, Total, BP, Exxon, Vivo, etc.). 

According to the latest version of the Regulation of the Minister of Energy and Mineral Resources, the Government sets BBM prices for kerosene, diesel oil, and Premium petroleum fuel at least once every three months, or more often if necessary. Petroleum businesses set General BBM retail prices according to a price formula stipulated in a Ministerial Regulation or Decree and must report these prices to the Ministry of Energy and Mineral Resources. If General BBM prices do not match the price formula calculations, sanctions can be imposed, according to the law, specifically in the Regulation of the Minister of Energy and Mineral Resources Number 04of 2015 enacted on 16 January 2015. However, this sanction was later deleted using the Regulation of the Minister of Energy and Mineral Resources Number 34 of 2018, enacted on 7 June 2018. 

As we all know, global crude oil prices have plummeted in the past few months. WTI crude oil prices dropped from USD 60.00+ at the end of January 2020 to < USD 20.00 per barrel on 17 April 2020. Such drop in global crude oil prices should also see BBM prices to descend. RON 95 BBM price in Malaysia is only MYR 1.25 ringgit or about IDR 4,437.5 per liter (exchange rate at IDR 3,550.00 per MYR) for 18- 24 April 2020. RON 97 BBM price in Malaysia for the same period is only MYR 1.55 or about IDR 5,500.00 per liter. 

BBM prices in Malaysia are not subsidized or taxed. In Indonesia, such unsubsidized and untaxed BBM price is referred to as the “basic price” plus profit margin, as meant in the retail price formula stipulated by the Government: basic price + margin + Motor Vehicle Fuel Tax (Pajak Bahan Bakar Kendaraan Bermotor – “PBBKB”) 5% and Value Added Tax (VAT) 10%. (In some regions, PBBKB is set at more than 5%.) 

Referring to BBM prices in Malaysia as basic price plus profit margin, RON 95 BBM price in Indonesia should be equal to IDR 5,103.00 per liter, i.e. Malaysian basic price x 1.15 tax factor (IDR 4,437.5 x 1.15). RON 97 BBM price should be around IDR 6,325.00 per liter. However, RON 95 BBM prices in Shell, Total, and BP fueling stations in Jakarta are all the same at IDR 9,650.00 per liter, or about 90% more expensive than prices for similar BBMs in Malaysia. RON 98 BBM price in Pertamina fueling stations in Jakarta is IDR 9,850.00 per liter, or about 55% higher than RON 97 BBM price in Malaysia. BBM prices di Indonesia are very high because there is no corresponding adjustment to the drop of global crude oil prices. If this is found to be true, petroleum businesses (Pertamina, Shell, Total, BP, Exxon, Vivo, etc.) have possibly violated the laws of the Republic of Indonesia that specify BBM retail prices, such as the Regulations and Decrees of the Minister of Energy and Mineral Resources, and the Presidential Regulation that serves as the legal source for these Ministerial rulings. If the case is proven, the Government must impose sanctions on these petroleum enterprises for burdening our citizens with unfair economic expenditures amid the COVID-19 pandemic. 

Secondly, if the current BBM prices are much higher than those of the stipulated formula, the people have a strong legal basis for claiming damages from petroleum businesses. This could be performed collectively. 

Third, BBM prices in all fueling stations operated by these petroleum businesses are about the same. This raises suspicion that these businesses have fixed a price by private agreement, which is a violation of the Anti-Monopoly Law (i.e. Law Number 05 of 1999 concerning the Prohibition of Monopolistic Practices and Unhealthy Business Competition). Therefore, the Indonesian Consumers’ Foundation (Yayasan Lembaga Konsumen Indonesia – “YLKI”) and the Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha – “KPPU”) should have enough grounds to investigate the case, as the issue is already clear: global crude oil prices have dropped, but domestic BBM prices remain stable. 

Indonesia is a legal country, as stated in Article 1 Paragraph (3) of our Constitution. Fuel prices are essential to the running of all activities in any country, and any manipulation of it is a danger to everyone. If there is an actual legal violation involved, especially in relation to this essential issue, we hope that it will be prosecuted according to applicable rules and regulations.