Oil price puts the squeeze on Indonesia  

Al Jazeerah has a report on the impact of rising oil prices on one-time OPEC member Indonesia. Fuel is still relatively cheap in the country, but is starting to become unaffordable in some sectors like fishing. No mention of supply constraints - under-investment instead gets the blame.

For the fishing boats of Indonesia, going to sea has become an expensive business. As global oil prices surge, fishermen are paying more to run their boats, but the fish they catch still sells for the same price.

I don't know what to do if the price keeps going up like this," says Sunada, a fisherman who makes his living in the waters off Java. "If we stop working we can't eat at all, but if we go on like this we don't make any profit."

Depending on highly subsidised fuel these fishermen could always make ends meet. But late last month the Indonesian government scrapped the subsidies, pushing the price of fuel up by 30 per cent overnight. The move triggered street protests across Indonesia, and many of Sunada's fellow fishermen decided to stop working in the hope of better times to come.

It is just one example of how the high oil price is slowly strangling Indonesia’s economy. At around $0.60 a litre, Indonesian petrol is still among the cheapest in the region, but even that is too big a jump for many Indonesians. The government says it has no choice.

As oil prices soared, the government's subsidy bill ballooned to more than $12bn a year – money, it says, could otherwise be spent on education and health care.

The government says it too is a victim of high oil prices and in a sign of the times it has decided to quit OPEC, the oil producer's cartel, of which it was a founding member.

Sri Mulyani Indrawati, Indonesia's finance minister, said the withdrawal is an indication of the government's concern over frustration with soaring commodity prices. "It is more that we want to voice our concern - not only over oil, now we are also concerned about food," she says. "If food is priced at a level that is not justified economically and is driven more by speculation and by narrow political interest, it's going to be damaging the global interest, damaging many countries and poor countries especially are going to suffer first."

Five years ago, Indonesia was still an oil exporter, but lack of investment has seen oil wells dry up and Indonesia's oil output plunge.