Electronic Theses and Dissertation

ABSTRACT

Title : Oil Market Analysis in Indonesian Economic stability
Name : Riri Dina Hasibuan
NIM : 1001101010015
Faculty/Department : Economics/Economic Development
Supervisor : Prof. Dr. Raja Masbar, M.Sc.
Concentration : Natural Resources and Environmental Economics

This paper aims to analyze the effect of government-mandated price control by fuel oil subsidies, ICP, US Dollars exchange rate, economic growth (GDP per capita), and gas price in Indonesia oil market. Then, there is also need to analyze the role of fiscal policy in fuel oil subsidies in Indonesian economic stability. Model analysis of the data used in this study is Two Stage Least Square (2SLS) using yearly data covering the period 1986–2012. The results show that there is negative correlation between ICP to oil demand while positive correlation found in ICP to oil supply but not significant. In demand sides, besides the ICP, economic growth (GDP per capita) affects oil demand positively and significant. Variable of fuel oils subsidies influence oil demand in Indonesia positively and significant at 96.2 percent. This result is empirical evidence that fuel subsidy is a main factor on increasing oil demand and bring excess demand for oil in Indonesia. Meanwhile, in supply side, US Dollars exchange rate influences oil supply negatively and significant at 0.03 level and gas price influence oil supply also negatively but not significant. Based on the result, fuel oil subsidy will be harmful to the economy and government should control by withdrawal gradually of fuel oils subsidies at the level to reduce oil energy intensity and Indonesian economic sustainability.

Keywords: Oil Market, fuel oils subsidies, ICP, US Dollar Exchange rate, gas price, economic growth, oil demand, oil supply, excess demand, 2SLS.

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