Indonesian Economists Back Pertamax Price Hike Amid Global Market Pressures

Indonesian economists have largely endorsed the government's recent adjustment of the Ron 92 fuel price, Pertamax, to Rp16,250 per liter. Experts believe this move was unavoidable after months of Pertamina, the state-owned oil and gas company, maintaining the price below its economic value. The adjustment reflects market mechanisms influenced by global economic conditions.

Hendry Cahyono, an economist from the State University of Surabaya (Unesa), explained that Pertamina had been using company funds to subsidize Pertamax. However, this "bridging fund" is a temporary measure to cushion the immediate impact of price surges on consumers. With the continued depreciation of the Indonesian rupiah and rising international oil prices, the company's capacity to absorb the difference diminished significantly.

Cahyono further noted that Pertamina's bridging funds are finite. As Pertamax is a non-subsidized fuel, it is primarily subject to market prices. If Pertamina were to continuously cover the price difference without adjustments, it could erode the company's profits. This would not only affect dividend payouts and contributions to the state but also negatively impact investor perception and financial ratings.

Similarly, Yayan Satyaki, an energy economics expert from Padjadjaran University (Unpad), pointed out that the weakening rupiah and increased global oil prices necessitate covering the price gap through these bridging funds. The cost of national energy provision rises because fuel pricing formulas are heavily dependent on global oil prices and the rupiah's exchange rate. He cited the Ministry of Energy and Mineral Resources Decree No. 19 of 2019, which uses the Mean of Platts Singapore (MOPS) as a benchmark, making the pricing highly sensitive to the dollar-rupiah exchange rate. Satyaki added that while consumers benefited from lower prices due to Pertamina's intervention, this situation could not persist indefinitely as the economic price of fuel naturally fluctuates with global market developments.