Pertamax Price Hike and the Fate of the Middle Class

Indonesia's non-subsidized fuel, Pertamax, has seen a significant price hike, increasing from Rp12,300 to Rp16,250 per liter. This sharp rise, coupled with the stable price of the subsidized Pertalite at Rp10,000 per liter, has created the largest price gap between the two fuels in history.

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Learning from the experience of April 2022, when Pertamax rose 39 percent and about one in eight buyers switched to Pertalite, we estimate Pertamax sales will drop about 10 percent.

Energy expert Yayan Satyakti from Padjadjaran University predicts this price disparity will lead approximately 10% of Pertamax consumers to switch to Pertalite. He draws parallels to a previous price increase in April 2022, where a similar shift occurred. Satyakti notes that consumers are unlikely to reduce their travel intensity but will opt for the more affordable fuel option.

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But Pertalite's quota is still sufficient to accommodate this shift. Only about a third of the remaining quota will be used.

The price increase is expected to impact different socioeconomic groups unevenly. While the poorest households (Desil 1) are largely unaffected due to minimal Pertamax usage, the middle class (Desil 5-7) is likely to migrate to Pertalite. Regular car owners in the upper-middle class (Desil 8-9) will face increased monthly expenses. Notably, the wealthiest households and companies (Desil 10), whose corporate vehicles are prohibited from using subsidized fuel, will bear the largest burden.

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In short, about half of the total burden of this increase is borne by the richest 20 percent of households. The increase in Pertamax works like a tax that targets the wealthy more.

Satyakti characterizes the Pertamax price hike as a de facto tax, with roughly half of the increased cost falling on the wealthiest 20% of households. Meanwhile, PT Pertamina Patra Niaga, the fuel distribution arm of state energy company Pertamina, assures that Pertalite supplies remain stable and available across all gas stations, urging consumers to use fuel responsibly and according to their vehicle's requirements.

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We urge the public to use energy wisely by buying fuel according to their needs and according to its purpose and according to the type of vehicle used.