Diversification of energy sources is a strategy that must be taken by Indonesia to anticipate global geopolitical turmoil that keeps crude oil prices high.
By
MEDIANA, KRIS MADA
·5 minutes read
KOMPAS/RADITYA HELABUMI
Activities at one of Shell's gas stations in West Jakarta, Monday (7/3/2022). World crude oil prices continue to soar and have penetrated above 130 US dollars per barrel. This condition is increasingly burdensome for Indonesia, which is dependent on oil imports.
JAKARTA, KOMPAS - The deadlock in the Russia-Ukraine negotiations facilitated by Turkey on Thursday (10/3/2022) kept the energy market under pressure. Pressure also came from the lack of clarity in the United States' negotiations with Iran and Venezuela. After touching US$130 per barrel a few days ago, the price of Brent crude oil on Thursday night, according to Bloomberg and Trading Economics, was at $115 per barrel.
Responding to the still high price of crude oil, the International Energy Agency (IEA) announced that it would release some of its strategic oil reserves to relieve pressure. Market excitement is increasing because the United Arab Emirates announced that it is ready to boost production under the agreement of the Organization of the Petroleum Exporting Countries (OPEC). Abu Dhabi said production could be increased by more than 800,000 barrels per day. In fact, OPEC and Russia agreed that the increase in production should not exceed 400,000 barrels per day.
"We support the increase in production and encourage OPEC to increase production," said UAE Ambassador to the US Yousuf Al Otaiba.
Although not a member of OPEC, Russia is a major oil producer with an average supply of 7 million barrels per day to the global market throughout 2021. Over the past few years, OPEC has always coordinated with Russia in terms of controlling oil production.
OPEC secretary-general Mohammed Barkindo doubts that other producers can replace supplies from Russia. He insisted that the current price increase was triggered by geopolitical issues, not supply problems. In fact, the market is worried that Russia will not be able to supply oil after the US and its allies imposed various sanctions on Russia. Sanctions make any transaction with Russia, including payments for energy commodities, difficult. The same thing has happened for years with Venezuela and Iran, the owners of the world's first- and third-largest oil reserves.
"We cannot control current developments and this condition has an impact on the market," he said.
Anxiety was also triggered by the development of the Iran nuclear talks. Secretary of Iran's National Security Council, Ali Shamkhani, said the US had made an unreasonable request to Iran. The request is seen by Tehran as Washington's lack of seriousness in reviving the 2015 Iran Nuclear Agreement. The deal has been suspended since May 2018 or after the US left the deal and imposed various sanctions on Iran.
We cannot control current developments and this condition has an impact on the market
Shamkhani did not elaborate on what the US request was. He only mentioned that the decision-making process in the US also complicated the Iran nuclear talks. In fact, it is hoped that the negotiations will allow the world to buy Iranian oil freely. Now, Iranian oil can only be sold on a limited basis due to various sanctions from the US and its allies.
The efforts of the Biden administration to get oil from Venezuela have also been hampered by US politicians. A number of US senators have opposed easing sanctions that would allow Venezuela to return to selling oil freely. US politicians have chosen to relax domestic oil and gas mining permits so that US businesses can benefit more from the current increase in oil prices.
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People hold placards as they take part in a protest against the Russian invasion of Ukraine, outside the Russian Embassy in Tel Aviv, Israel, Saturday, March 5, 2022. Israel's Prime Minister is meeting with Russian President Vladimir Putin in Moscow. Israeli Prime Minister Naftali Bennett's Office confirmed Saturday's meeting at the Kremlin, which came just days after Bennett spoke over the phone with both Russia and Ukraine's leaders.
Indonesia’s anticipation
Secretary-general of the Association of Oil and Gas Companies (Aspermigas), Moshe Rizal, said current conditions had caused market volatility and increased investment uncertainty. Long-term upstream oil and gas investments, such as exploration, will still be pressured by the situation between Russia and Ukraine.
Meanwhile, to anticipate the high price of crude oil, which will have an impact on the increase in the price of fuel (BBM), according to National Energy Council (DEN) member Satya Widya Yudha, Indonesia must start thinking about massive conversion from oil fuel (BBM) to gas fuel (BBG). Indonesia must also reduce imports of LPG by expanding the urban gas network and optimizing the use of electric stoves.
"Indonesia has an oil deficit. Natural gas is still in surplus, especially if all gas production in Indonesia is used for domestic purposes," said Satya.
In addition to the conversion of BBM to BBG, Indonesia must also continue to develop programs for developing renewable energy sources. The development of renewable energy can reduce Indonesia's dependence on fossil energy sources. The types of renewable energy that are abundant in Indonesia are solar, wind, water, geothermal and biofuels.
The executive director of the ReforMiner Institute, Komaidi Notonegoro, revealed that the utilization of renewable energy sources in Indonesia was still low, at around 2.8 percent of the total potential of more than 400,000 megawatts. Meanwhile, the average use of renewable energy by countries in the ASEAN region is around 10 percent of the total potential. A number of countries, such as Vietnam, Thailand and Malaysia, also have special laws related to renewable energy.
"The existence of a special law on renewable energy is important and can become a more powerful legal umbrella for the development of renewable energy and the implementation of incentive policies related to renewable energy," said Komaidi. (AFP/REUTERS)
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