Microeconomics.docx - Microeconomics Professor Lee Chew...

This preview shows 1 out of 4 pages.

Microeconomics Professor Lee Chew Ging Essay Maria Regina 32416033 November 2016 Petra Christian University SURABAYA
Image of page 1

Subscribe to view the full document.

Indonesia was known as one of the biggest oil producer in the world. Unfortunately right now, Indonesia has become one of the countries to import oil. This is caused by the lowering amount of oil produced in Indonesia each year, while the demand is getting higher tremendously. Moreover, the increase in oil price globally would be a big obstacle for Indonesia, which leads into government decision to give fuel subsidy. As we can see from the charts below, Indonesia has always been spending high amount of money for oil subsidy. Indonesian government has been providing the fuel subsidy since the first oil price shock in 1970. Even though it kept the fuel prices low and left a big advantages for the citizen from the poor to the rich, but the government spending is getting higher each time, which can lead to a poor economic growth for Indonesia. Reportedly, a total of 250 trillion rupiah was earmarked by the government for fuel subsidies in 2014, which is equal to 15 percent of the state budget. 1 As we can see from the graph below, the government spending 1 Roberts, J. (2015) 
Image of page 2
is increasing exponentially, until it reaches its peak on December 2014. However it started to significantly decreasing in 2015, because they cut the fuel subsidy on that year. Because of the increase in global oil prices, the government cannot sell the fuel with the same price as before, for it will cost them even more money in subsidy. Therefore, the government decided to abolish the fuel subsidy in Indonesia. Since cutting subsidies also
Image of page 3

Subscribe to view the full document.

Image of page 4
You've reached the end of this preview.
  • Fall '14
  • Ms. Adelina
  • Microeconomics, Peak oil, 1973 oil crisis, Agricultural subsidy

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern