Indonesia to Cut Fuel Imports with Ethanol Blend Program, Importers Object

Indonesia is set to significantly cut its fuel imports through a new policy mandating a 20% ethanol blend in gasoline, known as E20, by 2028. Energy and Mineral Resources Minister Bahlil Lahadalia stated the government's intention to curb dependence on foreign energy sources, despite facing opposition from some fuel importers.

Lahadalia explained that Indonesia currently imports 20 million kiloliters of gasoline annually to meet half of its 40 million kiloliter domestic consumption. The E20 program is projected to reduce this import volume by approximately 4 million kiloliters. This initiative aligns with global trends, as countries like the United States and Brazil have successfully integrated ethanol into their fuel supplies.

The minister highlighted the dual benefits of this policy: reducing import dependency and bolstering the rupiah's exchange rate. Indonesia expends roughly $30 billion annually on fuel imports, a significant drain on its foreign reserves. By decreasing these imports, the country aims to retain more foreign exchange and stabilize its currency.

Furthermore, Indonesia is exploring alternative international trade mechanisms that do not rely on the US dollar. Diversifying currency usage in trade transactions is seen as another strategy to lessen its dependence on the dollar and manage its foreign exchange outflow more effectively. The government is also considering converting some energy needs to biofuels, similar to how biodiesel has addressed diesel fuel requirements.