The doubling of world oil prices over the last year is in fact a double-edged sword for Indonesia. An OPEC member, the country contributes 6 percent of the world s oil supply, and has enjoyed a windfall of billions of desperately needed dollars following OPEC s agreement a year ago to hold down production. The views of a large section of the labor force were also articulated at the time of the last hike, when chairman of the Indonesian National Front for Labor Struggle, Dita Indah Sari, complained the Indonesian government were placing more priority on pleasing the IMF by withdrawing fuel subsidies, rather than attending to the people's needs. Her main point, an indicator of another horn of the dilemma, is that fuel subsidies for the lower income groups, to compensate for government subsidies, were ineffective. The value of the subsidies does not cover the losses incurred by the ever-increasing prices of basic goods.
Fuel subsidies are an explosive and politically sensitive issue.
The October street protests against the subsidy cuts, even muted as they were, raised the stakes in the political arena. This coming week of protests and demonstrations stem, in part, from the widespread almost permanent economic and political crises that have become mutually reinforcing, producing a downward spiral of instability, rising poverty and unrest, and government inaction with no end in sight. The social impact of the crisis in Indonesia continues to highlight underlying social tensions that had previously been obscured by the relative economic stability enjoyed under Soeharto. Gross market distortion across the board, a 'rich get richer and poor get poorer' reality of life in Indonesia, and the inability of the police to catch 'Tommy' Soeharto or the perpetrators of the bombing campaigns, are all factors which build up a head of steam in the pot.