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Monday, August 29, 2005

A "Fake" OPEC Member?

OPEC stands for Organization of Petroleum Exporting Countries. To me, that means OPEC's members not only produce oil for export, but are net exporters of oil who rake in the money when oil prices are high such as now. Meanwhile, Bloomberg TV is reminding me every half hour that Indonesia--an OPEC member--is suffering from high oil prices as evidenced by near-Asian crisis like rupiah devaluation. Indonesia has been a net importer of oil for a few months now. What is particularly head-scratching is why, in this short space of time, oil has turned from friend to foe with such force.

Political reasons may be part of why Indonesia hasn't been kicked out of OPEC. It's been suggested that OPEC doesn't want to lose the nation for risk of being seen as an "Arab cartel." Even suggestions that Indonesia is playing off OPEC against the US (which dislikes the cartel) in hopes that the former might decide to invest in boosting Indonesia's output again have been mooted in the said article. Nevertheless, given the potential for large-scale turmoil to envelop Indonesia, it'd be wise for their government to consider the long-term implications of its oil policies. Should Indonesia seek to recapitalize the oil industry and become a net exporter of the black stuff again? Are oil subsidies economically feasible, or are they contributing to the current rupiah devaluation? Time is ticking away.

UPDATE: The central bank of Indonesia has upped its O/N rate by 75 basis points to 9.5% and is selling off dollar reserves to defend the rupiah's value. Shades of 1997: it's flashback time. I just might start playing some "Savage Garden" records. Truly, madly, deeply do.

Posted by Emmanuel |

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