Jakarta (AsiaNews/Agencies) – The decision by Indonesian state-owned oil company PT Pertamina to cut gasoline supplies has stopped buses from running and caused line-ups at gas pumps.

In the country's largest cities like Jakarta and Surabaya, long line-ups at gas stations have been accompanied by price hikes; in Namosaian, prices rose by 100 per cent; in Kupang, public transit has come to a halt.

Fuel shortages are such that gas stations prefer to sell to businesses than to private car owners because they can bear higher prices. The practice itself is banned though.

"We lowered supply by 5 per cent," said Achmad Faisal head of Pertamina's fuel division. "Eventually, Pertamina aims to decrease premium gasoline supply sold at 2,400 rupees (US $ 0.24) per litre by up to 10 percent on weekends, and supply more Pertamax."

Pertamax is a high-quality gasoline sold at 4,000 rupees (US$ 0.40) per litre.

The company sought to reduce consumption but the problems caused by cuts have led Energy and Mineral Resources Minister Purnomo Yusgiantoro to demand Pertamina restore its regular level of  supplies.

On July 4, the oil company admitted that it intended to reduce fuel supplies because consumption in the first five months of 2005 had surpassed quotas set by the government by 10 per cent.

The government had forecast that fuel consumption would be around 59.6 million kilolitres over the whole year. However according to Indonesian Vice-President Yusuf Kalla, at the current rate consumption would be 5 per cent higher than expected (reaching a total of 62.5 million kilolitres) which would mean higher government fuel subsidies. For this reason, Kalla told Indonesians "[d]on't waste fuel on unnecessary things."

Although Indonesia has important oil reserves, its refining capacity has not been able to keep up with demand—which now stands at 1.4/1.5 barrels per day—because of declining investments over the past ten years. Instead, Pertamina can just refine a million barrels per day and the rest must be imported.

Several analysts are not convinced by the government's claims; they point out that in 2004 fuel consumption was equal to 62 million kilolitres. They note that 2005 levels could not be lower than the previous year, especially because of the expanding domestic auto market—in the first three months of this year, car sales rose by 38.5 per cent.

Minister Yusgiantoro said that the cabinet will meet to examine the issue of rising demand for fuel and its impact on forecast consumption.

The government is considering alternative measures to reduce fuel consumption such as a progressive tax on cars and on electric power use.

In March, the government did remove some subsidies, leading to price hikes of around 30 percent that sparked protests across the country. (PB)