Bambang Ismoyo, Jakarta – Surging global oil prices past $100 per barrel are set to push up Indonesia's non-subsidized fuel prices, raising the risk of a sharp shift in consumption toward cheaper subsidized fuels and putting fresh pressure on the state budget.

Abra Talattov, an economist at the Institute for Development of Economics and Finance (Indef), said the widening gap between subsidized and non-subsidized fuel prices could drive consumers toward subsidized fuel.

"With this condition, the price disparity will widen, encouraging people to shift their consumption to subsidized fuel," Abra said to B-Universe on Tuesday.

Indonesia has set its 2026 quotas at 29.7 million kiloliters for Pertalite, 18.6 million kiloliters for subsidized diesel, and 8.3 million metric tons for subsidized LPG. But rising demand could quickly push consumption beyond those limits.

"The government will face another threat, namely excessive public consumption," Abra said.

He also warned that panic buying could worsen the situation, as price uncertainty often prompts consumers to purchase more fuel than usual, straining distribution and supply of subsidized fuel.

"Non-subsidized fuel consumption is also expected to surge, especially with panic buying that can drive extremely high demand," he added.

Without timely policy intervention, the spike in consumption risks inflating the country's energy subsidy bill and disrupting supply stability.

Fuel retailers, including Pertamina, typically adjust non-subsidized fuel prices at the start of each month in line with global oil movements. With prices continuing to climb, an increase in non-subsidized fuel prices appears increasingly unavoidable in the near term.

Source: https://jakartaglobe.id/business/oil-rally-sparks-risk-of-subsidy-overrun-in-indonesia-indef-say