Pertamax price hike pressures Indonesian middle class purchasing power

The recent surge in the price of non-subsidized Pertamax fuel is significantly impacting the purchasing power of Indonesia's middle class, raising concerns about shifts in consumption patterns and a potential move towards subsidized fuels. The price increase, exceeding 30%, places a heavier burden on household expenses, particularly for daily mobility needs.

Abra Talattov, Head of the Center of Food, Energy, and Sustainable Development at the Institute for Development of Economics and Finance (Indef), explained that the middle class is the primary consumer of Pertamax. With prices rising from Rp12,300 to Rp16,250 per liter, this represents a 32.1% increase in expenditure for daily transportation. This necessitates deeper cuts into budgets allocated for other essential goods and services.

While the impact on national inflation might be less pronounced compared to hikes in subsidized fuels like Pertalite or Solar, the pressure on middle-income households, especially in urban and buffer zones, is considerably greater. National data indicates that transportation costs average 12.46% of total income. In some metropolitan buffer areas, this figure is even higher due to the extensive daily commutes of workers. Depok city, for instance, records the highest transportation expenditure at 16.3% of household spending, with Bekasi, Surabaya, and other agglomerations also showing relatively high ratios. Conversely, Jakarta has a lower ratio due to its more integrated public transportation system.

Before this latest price adjustment, non-subsidized fuel sales showed positive growth, with Pertamax daily sales increasing by 20.6% and Pertamax Turbo by 76.6% last year. This trend was attributed to growing consumer awareness of fuel quality, improved post-pandemic purchasing power, and a desire to avoid long queues at subsidized fuel stations. However, the significant price hike risks reversing this trend. Indef is urging the government to develop targeted policies to safeguard the purchasing power of the middle class, a group often excluded from regular social assistance programs but highly sensitive to energy price fluctuations.