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Jakarta (ANTARA News) - An average increase of 28.7 percent in fuel oil prices is too high and could cause panic among the people, economic observer Tony A Prasetyantono said here on Wednesday.

He said he agreed with the government`s intention to increase fuel oil prices based on its need to reduce its fuel oil subsidy but before doing it the government should also take into account the people`s objective and psychological conditions.

"I think, psychologically, a logical increase should not exceed Rp1,000 per liter because it would be objectively acceptable to the people," he said.

So, he said, the increase should not merely be based on mathematical assumptions but also on considerations of the people`s financial capability.

The finance ministry has undertaken a study on increasing subsidized fuel oil prices by an average of 28.7 percent in June 2008.

The plan was made in response to the upward trend in the crude oil price in the world market which had reached US$120 per barrel, according to a finance ministry source on Tuesday night.

It was said that the price of premium gasoline would be raised from Rp4,500 to Rp6,000 per liter, diesel oil from Rp4,300 to Rp5,500 per liter and kerosene from Rp2,000 to Rp2,300 per liter.

The source said with the proposed fuel oil price hikes the government would be able to save up to Rp25.877 trillion in fuel oil subsidy funds from the state budget.

Source