The power of the oil price can be seen in Indonesia’s national energy strategy which set out energy diversification policies that focused on renewable resources to reduce dependence on fossil fuels, and conservation measures to improve the overall energy efficiency of the economy.
The implementation of these policies has never been consistent, tending instead to follow the boom-bust cycle of oil prices. When oil prices rose last year up to US$147 per barrel in July, the government suddenly trumpeted the vital role of palm oil-based biofuels and the urgent need to make energy conservation compulsory for industrial companies.
However, it was back to business as usual once oil prices dropped back to as low as $35 per barrel early this year. Most palm oil-based bio-diesel producers had reportedly either stopped production or slashed their operating capacity to 20 percent, because of policy inconsistency and an inability to compete with subsidized gasoline and diesel oil.
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