Energy Experts Reveal Secrets: Oil Prices Could Drop If These 5 Factors Are Fulfilled

JAKARTA – The development of world oil prices is still on an upward path. This condition has forced many countries to re-calibrate their financial plans, including Indonesia.

The government some time ago even received the DPR's approval to renew the Indonesian Crude Price (ICP) in the 2022 State Budget Law from previously 63 dollars to 100 dollars. This has implications for the cost of subsidies and energy compensation for the community to increase.

Former Deputy Minister of Energy and Mineral Resources Arcandra Tahar said that fluctuations in oil prices are normal. This is because energy commodities are quite sensitive to global dynamics. He also believes that the price level will not always be at the top.

"Logically, if there are those who can raise prices, of course there are those who can lower them, assuming the Russia-Ukraine crisis continues," he said in a written statement quoted on Monday, June 20.

So, what are the factors that can make the price of black gold slop back? According to Arcandra, at least five important factors are needed in an effort to reduce the price of oil.

First, negotiations on the Iranian nuclear issue reached a point where the sanctions imposed so far could be lifted. He said, with the exemption of sanctions, the supply could increase by at least 2.5 million barrels per day or about 2.5 percent of the world's needs.

“This means that the supply of oil from Russia which is destined for exports of 4 million bpd can be handled mostly from Iran. The rest can be obtained from increased production from oil fields in Saudi Arabia, Kuwait and the UAE," he said.

Second, the economic sanctions that have been imposed on Venezuela can be partially lifted, especially those related to oil and gas exploration and production activities. To note, the country in the Americas has the largest oil reserves in the world, exceeding Saudi Arabia.

“It is not easy to reactivate oil fields that have been abandoned for a long time. In addition to taking a long time, it also requires a lot of funds, but the lifting of these sanctions gives a signal to the market that there will be potential supply that can replace Russian oil," he said.

Third is the slowing down of world economic growth due to rising commodity prices that contribute to high inflation.

Developed countries such as Europe and the United States experienced unexpected inflation. As a result of this slowdown in economic growth, the need for oil and gas will decrease so that it can push oil prices even lower.

Fourth, world oil companies are accelerating the use of decarbonization technology, so that fields where production can still be increased are able to supply oil with environmentally friendly technology.

“This will give a positive signal to the pressure group that has been voicing concerns about environmental damage. Environmentally friendly oil and gas initiatives are needed so that oil needs during the transition period can be met so that prices do not fluctuate,” he stressed.

While the fifth is accelerating the production of biofuels with feedstocks (raw materials) that do not compete with food ingredients.

"With all the challenges that exist, it is not easy to realize biofuel as a substitute for fossil fuels. At the very least, this effort must continuously look for breakthroughs so that the challenges in terms of raw materials and prices can be overcome," concluded Arcandra.