Subsidized fuel costs in developing countries are pushing up oil prices, the Paris-based International Energy Agency said in a report.

The IEA also lowered its projected demand for oil; high prices and economic weakness are starting to cut into oil demand, it said. That's not the case, however, in China and the Middle East, where government subsidies are keeping demand up, the Globe and Mail reported.

In China, the government's subsidy program could cost as much as $87 billion. Saudi Arabia and Iran also keep retail prices artificially lower, and Venezuelan President Hugo Chavez subsidizes fuel prices not only in his own country, but in Cuba and Nicaragua.

Russia has subsidized gasoline prices and Vietnam has frozen oil prices until June. Taiwan, Thailand, Indonesia and Malaysia also all have some kind of price-stabilizing mechanism, but their governments are losing money fast.

While the IEA expects demand in industrialized countries to drop by 0.7 percent, it said Tuesday oil consumption in the rest of the world will grow by 3.7 percent this year.

New oil, gas fields will add to Indonesia supply

BPMigas announced 13 new oil and gas fields are expected to begin production this year, which should help meet Indonesia's goal of 977,000 barrels per day.

Though the Organization of Petroleum Exporting Countries will not increase its production, other countries and organizations have noted supply constraints as one of the drivers for high oil prices and have invested in new production.

Among the new fields in Indonesia are the Tangguh gas block in Papua operated by BP, the Cepu block in East Java owned by ExxonMobil, and the Mahakam block in East Kalimantan owned by France's Total, the Jakarta Post reported.

The new fields are expected to produce an additional 47,100 barrels of oil equivalent a day of combined oil and gas; 9,300 of the barrels will be oil, said BPMigas Chairman Priyono, who like many Indonesians goes by one name only.

"We are optimistic we can reach the 977,000 barrel-per-day oil production target," he said.

The country's oil production had reached 955,847 barrels per day in January, 986,848 barrels per day in February, 985,872 in March and 978,960 in April.

The new fields will help make up for the fields that failed to start producing this year, including the Senoro gas block in Central Sulawesi, state oil and gas firm Pertamina's Pulau Gading and Sungai Kenawang blocks in Jambi and American oil company Chevron's Sadewa block in East Kalimantan.

Australia says oil, gas tax breaks to go

For the first time in 30 years, the Australian government will cut its tax exemptions for gas field explorations.

Oil and gas giants like Woodside, BHP Billiton, Shell, Exxon, British Petroleum and Chevron will now have to pay tax on the condensate, a light crude oil that flows when a gas find is first tapped. The companies were previously profiting from the "cream" that was being exported to be refined into petroleum and diesel.

The government estimates it will save more than $2.5 billion by no longer exempting oil and gas companies, The Age reported.

Condensate will now be subject to the same top 30 percent excise rate as crude oil from petroleum fields. The first 30 million barrels of crude oil produced from the field is exempt.

The exemptions, which cost Australian taxpayers an estimated $600 million a year, were first introduced to help kick-start the North West Shelf project.

High oil prices in the past months have meant more profit for the companies churning it out -- it is estimated that about 13.5 billion liters of condensate is being exported per year, putting $9 billion a year in the pockets of big oil firms.

The government hopes more condensate will stay in the country and be used to produce diesel so they can import less oil.

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Closing oil prices, May 14, 3 p.m. London

Brent crude oil: $122.03

West Texas Intermediate crude oil: $125.12

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(e-mail: energy@upi.com)