The cheapest oil on the planet is in Indonesia. The government subsidies it heavily, to the tune of about 3% Indonesia GDP, and approximately 30% of the Indonesia government budget. By comparison, Australia spends about 2% GDP on its military. This is a pretty massive and expensive subsidy for the Indonesia government. They have tried to remove it in the past, Suharto tried so in 1999 at the IMF's urging, but coupled with contagion, this contributed toward the Indonesian's throwing Suharto out. President Yudhoyono is going to remove the subsidy, Indonesians can expect to see petrol price rises of nearly 90%.
From the ABC Asia Pacific article;
Indonesia is the biggest oil producer in South East Asia but, due to ageing oil fields and underinvestment in exploration, domestic production has been unable to keep up with growing demand. In 2004, Indonesia became a net importer of oil for the first time. But the products are being sold to consumers at much cheaper prices than Pertamina is forced to pay on the world market. ... Subsidies are also blamed for the black market trade in cheap petroleum products bought in Indonesia and smuggled out to be sold at higher prices in countries such as Singapore. Eighteen Pertamina officials were implicated in a smuggling ring uncovered this month.The fight for a secular liberal democracy and a market economy in Indonesia goes on. From some of the interviews of Indonesians I heard on NPR, it sounds like Indonesians accept that the removal of subsidies is necessary, though many qualified this by wanting the money saved to be spent on other services and infrastructure for the people. Others worried that this money might disappear to corruption. The eyes of politicians and economists around the world will be on Indonesia as it removes the subsidy and Indonesians get used to higher gas prices.
