Indonesia Holds Fuel Prices Steady Through Year-End on Secure Supply

In a significant announcement that will bring relief to many Indonesian households, the government has committed to holding subsidized fuel prices steady through the end of 2026. Minister of Energy and Mineral Resources Bahlil Lahadalia conveyed this assurance, directly citing President Prabowo Subianto's directive to prioritize price stability. This decision is underpinned by the government's confidence in the nation's secure energy supply, with ample stocks of diesel, gasoline, and LPG.

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I convey to the public that, Insha Allah, our stock is above the minimum standard, both for diesel, gasoline, and LPG. Insha Allah it's safe, and once again I say that we have agreed, following the president's direction, that the price of subsidized fuel will not be raised until the end of the year.

Minister Lahadalia highlighted that this policy remains fiscally sound, as the current Indonesian Crude Oil (ICP) price is below the State Budget's assumption. This provides the government with the necessary fiscal room to maintain current fuel prices. However, the reality of Indonesia's energy consumption cannot be ignored; the nation relies heavily on imports to meet its daily demand of approximately 1.6 million barrels, with domestic production only covering about 600,000 to 610,000 barrels.

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The government's policy of not raising fuel prices deserves appreciation, but future fiscal conditions require adaptive measures to maintain the stability of the state budget.

While the government's commitment to price stability is commendable, a dissenting voice has emerged from within the Indonesian House of Representatives. Lamhot Sinaga, Chair of Commission VII, has urged the government to consider fuel price adjustments. This call stems from concerns about the escalating global oil prices, driven by geopolitical tensions in the Middle East, and their potential to significantly strain the 2026 State Budget. Sinaga points out that every $1 increase in oil prices can burden the budget by up to Rp6 trillion, and with current prices soaring far beyond the budget's assumption, adaptive measures are crucial. From our perspective at Tempo, while stability is paramount, a balanced approach that considers long-term fiscal health is essential, especially given Indonesia's import dependency.

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When world oil prices soar to US$140 per barrel, while the assumption in the State Budget is only 70 U.S. dollars, the pressure on the fiscal budget becomes very significant. This is not a normal situation, but an emergency condition that requires a quick and measured response.