Reasons for Indonesia's Withdrawal from OPEC Deemed Vague, Why?

The decision was questioned because the government revealed the reason for the withdrawal because the OPEC decision did not comply with the assumption of oil production in the 2017 Budget. In the 2017 Budget, national oil production was only cut by 5,000 bph.

“If the reason is due to the budget, well, it becomes very vague. I mean how much was it compared to, for example, our image and our credibility declining among OPEC members?” energy observer and Director of Indonesian Resources Studies Marwan Batubara told Kompas.com, Jakarta, Thursday (1/12/2016) night.

In fact, according to Marwan, Indonesia would gain many benefits if it remained in OPEC. Because the OPEC decision to cut oil production by 1.2 million bph will lead to an increase in world oil prices.

It is predicted that the prices of Indonesia's leading commodities will also increase along with the rise in world oil prices. So far, he said, the plunge in commodity prices has been due to plunging oil prices.

With the recovery in oil and commodity prices of Indonesia's key exports, Marwan is confident that state revenues will increase.

“The government should have a strong commitment so that these prices will recover and compensate for the lack of revenue in the budget due to the reduction in oil production of 37,000 barrels,” said Marwan.

Disproportionate

Apart from the budget reason, Indonesia's decision to withdraw from OPEC was also considered disproportionate to the good relations between oil exporting countries.

After all, Indonesia had only recently returned to become a member of OPEC in December 2015. Marwan remembers very well the reason for the government to re-enter OPEC in December 2015.

At that time, the government had stated that there are many benefits to be gained by joining the organization, and one of them is the benefit of lobbying among members.

”Is it proportionate to the good relations among OPEC members from whom we are very dependent for oil imports? Previously, when we re-entered, it was an honor from the members because we were accepted. But as soon as there is a small problem, we become inconsistent,” said Marwan.

In fact, the government should consider various factors comprehensively before deciding to withdraw from OPEC.

These factors include Indonesia's image in the eyes of OPEC countries and in the broader economic scope related to Indonesia's export commodities.

OPEC Countries Agree to Cut Oil Production