Jakarta, 2 March 2026 — Rising global oil prices are once again putting Indonesia’s domestic fuel pricing policy under pressure. As a net fuel importer, the country remains highly exposed to external energy shocks, reviving the policy dilemma between price stabilization and fiscal sustainability.
According to Piter Abdullah, Policy and Program Director at Prasasti Center for Policy Studies, the key question is no longer whether domestic fuel prices will face upward pressure, but how far the government can absorb that pressure through fiscal instruments.
“When global oil prices rise, domestic fuel prices inevitably come under pressure. The real issue is how much the government can contain the increase through available fiscal capacity,” Piter noted.
Indonesia’s structural vulnerability lies in its import dependence. National oil consumption stands at nearly 1.5 million barrels per day, while domestic production supplies less than half of that demand. This gap makes domestic pricing highly sensitive to global oil movements.
The fiscal implications are significant. Piter estimates that every USD10 per barrel increase in global oil prices could add approximately IDR50 trillion to the energy subsidy burden. This illustrates the scale of the trade-off: protecting household purchasing power through subsidies comes at a measurable fiscal cost.
If the government chooses to maintain fuel prices through higher subsidies, budgetary pressure intensifies. Conversely, allowing prices to adjust upward could accelerate inflation. Fuel prices have broad pass-through effects, affecting transportation, logistics, and eventually the prices of consumer goods.
“Subsidy decisions are never costless,” Piter emphasized. “Holding prices steady means expanding fiscal commitments. Letting prices rise reduces fiscal strain but increases inflationary pressure. The policy balance must be carefully calibrated.”
In this context, fiscal space becomes the determining factor. The sustainability of subsidies depends not only on oil price levels but also on the broader health of public finances. With global energy volatility persisting, policy credibility and disciplined budget management will play a decisive role in maintaining macroeconomic stability.