Spring Cleaning in Indonesia

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After 46 years of patronage, Indonesia has recently publicized its plans to leave the Organization of Petroleum Exporting Countries (OPEC). Though cartels are well and dandy, they only work if everyone plays by the rules. Rule number one: your country must be an exporter of petroleum. East Asia's only OPEC member, however, has been a net importer of oil since 2004. This is compacted by heavy fuel subsidies that keeps its citizens numb to $120 per barrel oil. Any rise in oil prices is currently covered by the governement, which is quickly draining government funds.

Indonesia is fast realizing that it needs to change how it runs its economic and investment policies in the oil and gas sector. At a recent industry meeting in Houston, Indonesia's director general of the Minitry of Energy signaled a friendlier approach toward attracting new investments in the exploration and development of new oil. True signs of progress, however, will be riding on the government's overall stablility. Public reaction to raising fuel prices in the coming weeks will perhaps also dictate how the government moves forward. Fear of a violent and pissed off public is what keeps Indonesia's leaders up at night. Something our presidential-hopefuls should take into consideration when making populist proposals that distort the true price of oil.

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