Norman Harsono, Jakarta – Indonesia's largest fuel retailer has lowered the price of its Pertamax and Pertamax Turbo gasoline brands for the second time this year to promote the consumption of nonsubsidized fuels.
State-owned oil company Pertamina, which operates more than 90 percent of all gas stations in the country, lowered the price of the two nonsubsidized fuels on Feb. 1. Final retail prices still differ between regions because of different fuel tax policies. In Jakarta, Banten and West Java, the price for Pertamax was reduced from Rp 9,200 per liter to Rp 9,000 per liter while Pertamax Turbo was reduced from Rp 9,900 per liter to Rp 9,850 liter.
Pertamina spokeswoman Fajriyah Usman said in a statement on Saturday, Jan. 1, that the lowering of fuel prices was "a corporate action that follows requirements set by the government."
The Energy and Mineral Resources Ministry issued on Dec. 26 Ministerial Decree No. 187/2019, which tightened the upper and lower selling prices of gasoline and diesel. The decree introduced a new formula to calculate retail prices based on the average selling prices in Singapore as per the Mean of Platts Singapore (MOPS).
"The concept is that initial infrastructure investments should be returned within two, three, four years. We consider investments into acquiring oil tanks, pipes, trucks should all be returned by now so that all that remains is operational expenditure," said the then acting oil and gas director general Djoko Siswanto.
Forcibly lowering nonsubsidized fuel prices is part of the government's effort to promote usage of such fuels and, thus, slash subsidized fuel consumption. The regulation further closes the price gap between Pertamax and Pertamax Turbo and the subsidized Premium gasoline brand, which is pegged at Rp 6,450 per liter under the One Fuel Price policy.
According to the energy ministry, subsidized fuel distribution reached Rp 85.7 trillion last year, which was 14.9 percent below the annual expectation, but still a sizable chunk (5.2 percent) of the 2019 state budget. The government expects the value of subsidized fuel distribution to be even lower this year at Rp 70.5 trillion.
Citing similar regulatory reasons, Pertamina first lowered prices on Jan. 5 for its Pertamax, Pertamax Turbo, Pertamina Dex and Dexlite fuel brands. Prices for the former two brands in Jakarta were lowered from Rp 9,850 to Rp 9,200 per liter and from Rp 11,200 to Rp 9,900 per liter, respectively.
Local media outlets began reporting of lower retail fuel prices at Shell and Total gas stations starting Jan. 3 by up to 15.71 percent and 15.8 percent, respectively, for certain fuels sold in Greater Jakarta.
"Shell's internal policy sets prices depending on several conditions such as global oil prices, taxes, subsidies, logistics, local conditions, local regulations and operational costs," said Shell vice president of external relations Rhea Sianipar.
Fuel retailer BP-AKR said it has been wary of the ministerial decree since at least December last year, after several local business-oriented news outlets reported of its issuance. BP-AKR said it considers the decree one of two major uncertainties – aside from land acquisition – in its expansion plans.
"We just need to be cautious when the new regulation is in place in January," BP-AKR president director Peter Molloy told The Jakarta Post on Dec. 18. "We will look at how this regulation plays out before we make further investments."