Blog
Indonesia to leave OPEC
29th May 2008
The Indonesian government has announced that it plans to leave the OPEC cartel next year. This is reported here in this video clip from the BBC.
The country wants to concentrate on investing in an expansion of their domestic oil output to meet needs at home rather than being part of the export cartel which seeks to impose production quotas on member nations. Indonesia is actually a net importer of oil (in that sense she is in the same situation as the UK) and has been in OPEC since 1962. I didn’t realise before picking this story up that there is an annual membership fee of $3.1 million to be a member of OPEC.
Indonesia’s oil output is at a three decade low despite the incentive of super-high global crude prices. A lack of investion has hampered their domestic capacity leading to a rising import bill for crude oil. The country has heavily subsidised oil imports by up to 60% of their cost for many years partly to protect lower income families who rely on kerosene for cooking. But the rising world price has created a major financial headache for Indonesia - the price of maintaining the subsidy has become too high - it takes up an enormous amount of income from their existing oil exports.