Indonesia, Opec’s only Asia-Pacific member, on Wednesday quit the oil cartel, finally accepting its dramatic shift from an oil exporter to a consumer crippled by high prices.
The decision is one of the strongest signals yet of the dramatic economic and social impact of $130 oil on Asia, the world’s engine of economic growth and oil demand.
Purnomo Yusgiantoro, Indonesia’s energy minister, explained that, as a net importer of oil, the country wanted world oil prices to fall while Opec’s 12 other members did not.
Adam Sieminski, analyst at Deutsche Bank, said the decision would have little impact on the cartel or the market as a whole. “It seems to me to reflect a mature understanding of a change in self-interest,” he said.
Jakarta, which joined the group in 1962, raised its domestic fuel prices by nearly a third on Saturday in an effort to rein in its spending on subsidies. Taiwan and Malaysia have taken similar decisions.
International oil futures prices dropped on Wednesday to a week-long low of $125.96 a barrel, as traders bet that higher fuel costs in Indonesia and its neighbours would damp demand. But the decline was reversed later in the day and prices rebounded to $130 after an analyst forecast of $150 oil.
Given the decline in growth in North America and Europe, Asia is expected to account for about 70 per cent of this year’s 1.03m barrel-a-day increase in oil consumption, according to the International Energy Agency.
Kurtubi, director of the Centre for Petroleum and Energy Economic Studies in Jakarta, said Indonesia’s decision to leave Opec was appropriate in the light of its net importer status.
“It’s the right decision because Indonesia wants oil prices to fall to stop its state budget bleeding.”
The country must address its declining oil output, he added.
Indonesia’s oil production peaked in 1976 and, after fluctuating for two decades, started to decline in 1995 because of ageing fields and a lack of investment. It became a net oil importer in 2005 and today produces fewer than 1m barrels a day.
It is traditionally the region’s natural gas supplier, but that position is also deteriorating. After it recently failed fully to renew some of its liquefied natural gas contracts, Asian consumers such as Japan abandoned it for Australia and other further-flung producers.
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