Government looks to biofuel to stave of oil crisis

Benget Simbolon Tnb., The Jakarta Post, Jakarta

Bad times make good policy, good times make bad policy. This adage succinctly sums up Indonesia's experience with oil.

Indonesia has twice benefited from oil booms. The first was in 1973/1974 when the Organization of Petroleum Exporting Countries (OPEC) launched an oil embargo against the United States and its allies in Europe due to their support for Israel in the Middle East conflict.

The second one, in 1978/1979, was due to the revolution in Iran, the world's third largest producer of oil, which led to the toppling of the shah.

As an oil exporter and a member of OPEC, Indonesia raked in windfall profits from the two oil crises. Its oil income at that time accounted for about 70 percent of the country's total income.

Although many analysts say that the Indonesian government used these windfall gains to help develop the country, others say that the government totally failed in its obligations to help develop a sound economic structure, including promoting the social economy.

After the era of oil windfalls ended in 1982, economists say that the Indonesian government adopted a number of appropriate new policies.

One of them was to promote the development of the non-oil and gas sectors in order to increase tax revenue. This managed to compensate for the decrease in oil income by increasing revenue from other sectors of the economy.

In only five years, Indonesia increased its non-oil and gas income from only 26 percent to 62 percent of total income.

However, after benefiting from previous oil crises, now Indonesia finds itself on the receiving end. Increasing oil prices on the world market have badly affected the country, which is now a net oil importer. The higher prices have created an economic conundrum for the government, which has to allocate trillions of rupiah to pay for fuel subsidies.

But the bad times appear to be teaching the government a lesson. It recently adopted a number of policies to diversify energy sources away from the dominance of hydrocarbon-based fuels.

Under the target the government has set for itself, it is planned that Indonesia will cut the contribution of oil to total energy consumption from the current 55 percent to only 15 percent in 2025 by developing other energy sources, such as hydropower, coal, gas and biofuels.

Will the country succeed in achieving the target? Many are optimistic that it can.

Such optimism is reflected by ministers and government officials across the archipelago. Some local governments, such as those in Lampung and East Nusa Tenggara provinces, have initiated the development of biofuel industries in their respective regions.

In Jakarta, state-owned oil firm Pertamina has begun selling a biodiesel mix. But it is so far only available at four gas stations.

Meanwhile, the West Nusa Tenggara administration has been successfully using castor oil to generate electricity.

Robert Manurung, a researcher with the Bandung Institute of Technology (ITB), who has conducted detailed research on the industrial use of castor oil, expressed optimism that Indonesia would be able to develop a viable biofuel industry.

"We have a lot of potentialities that could be tapped to develop our economy. But very often we underestimate what we have here," he told The Jakarta Post last week.

This could be seen, for example, from people's preferences for imported products. "They trust the foreign ones more than the local ones," he lamented.
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