In a much-forecast move Indonesia has left the oil cartel OPEC. A member since 1962wo, it has been considering leaving for the last three years.
It was the only OPEC member in south east Asia, and energy minister Purnomo Yusgiantoro explained that the country can no longer afford to bear the cost of OPEC’s pricing policy.
Indonesia’s oil fields are elderly, and production is declining, with the country now needing to import a third of its oil. Production has nearly halved since its peak in 1977, and disputes with Exxon Mobil discouraged investors and delayed field developments. Indonesia also lacks refining capacity, making imports even more expensive.
OPEC will lose two million euros a year membership fees, but last year two new members swelled the cartel to 13 members, with the arrival of Angola, and readmission of Ecuador. It controls 40 percent of the global supply.
Indonesia’s pulling out will not affect OPEC’s clout on the market, but it might narrow its world view and ethnic outlook, losing an Asian perspective at meetings at a time when Asian demand is becoming the dominant factor in the market.
Analysts say the government could no longer justify belonging to a cartel pushing prices up at a time when domestic prices are causing pain for Indonesian consumers. It had to raise prices by 30 percent last month to avoid a crippling increase in fuel subsidies.