Indonesia's Transition to a Net Oil Importing Country: Critical Issues in the Downstream Oil Sector

Abstract

Given its limited oil reserves and increasing petroleum product consumption, Indonesia will become a net oil importer in the near future, facing increasing petroleum product imports while continuing to export still available but diminishing crude oil This paper examines the implications of that prospect for Indonesia's terms of trade, assessing the future supply and demand balance in the domestic market The assessment includes a petroleum price forecast vis-à-vis the international market, in which Indonesia imports more valuable products while exporting less valuable crude oils To meet this challenge, the key policy issue in the downstream oil sector is the need to bring private participation into the refining and retailing business, by means of a freer market pricing policy and private access to the domestic market.

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Widhyawan Prawiraatmadja

The author is Head of the Petroleum Market and Refining Project of the East-West Center Program on Resources Energy and Minerals. The Project conducts research on the domestic supply and demand balance of petroleum products in major Asia–Pacific countries, and the implications of this balance for the global market.