Indonesians queue for fuel ahead of massive price hike

Motorists queue on their vehicles to buy petrol before a fuel price hike on Saturday by the...
Motorists queue on their vehicles to buy petrol before a fuel price hike on Saturday by the government, in Makassar, South Sulawesi province. Photo by Reuters

Indonesia will raise motor fuel prices by an average of 33 percent, as previously signalled, to contain subsidies that have drained state funds and damaged confidence in the economy, the oil minister said.

Long lines of cars and motorcycles started to form at petrol stations in the sprawling capital of Jakarta late on Friday (local time) as drivers rushed to fill their fuel tanks before the price hike.

Despite the changes, Indonesia will still have some of the cheapest prices in the region.

"The price will come into effect for all regions across Indonesia on June 22," Energy Minister Jero Wacik said.

Fuel subsidies, which the government argues largely benefit the rich, cost around $20 billion last year and have been pushing the former OPEC member's current account deeper into deficit as oil imports rise.

Hundreds of police were placed on high alert for protests and unrest, but there were no reports of major violence.

Some short-term economic pain is expected from the overnight hike in prices, including a 44 percent rise for gasoline and 22 percent for diesel.

The finance ministry has warned that 2013 inflation would surge to a five-year high and pressure the central bank to raise interest rates again.

President Susilo Bambang Yudhoyono agonised for months over the question of fuel prices, worried about the political fallout ahead of presidential and general elections next year.

Yudhoyono insisted on an aid package for the poor before signing off on higher fuel prices. Around 9 trillion rupiah ($910 million) in cash will be distributed to more than 15 million families over a four-month period.


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