JAKARTA (Bloomberg): President Prabowo Subianto’s administration has already faced market turmoil, a tumbling currency and civil unrest. Now Jakarta is grappling with fuel prices that have spiked across the region as a war in the Persian Gulf upends supply - just as more than 100 million Indonesians hit the road.
The end of the holy month of Ramadan heralds one of the largest temporary migrations anywhere, when close to half the population travels home for the Islamic festival of Eid Al-Fitr, which falls at the end of this week.
Cars jam motorways, airlines add flights and families cook large traditional meals on gas stoves, all of which help spike fuel consumption.
Disrupted energy supplies from the Middle East - thanks to a deepening conflict in the Persian Gulf - have already created fuel shortages and pushed up prices.
These have prompted some governments across South-East Asia to impose four-day weeks for public-sector workers, mandate higher air-conditioner temperatures and urge citizens not to take unnecessary trips.
One exception has been Indonesia, a net importer of both crude and fuels, which has instead largely sought to reassure consumers that the country is well-supplied and that prices will not rise.
As the country prepares for Eid, analysts argue the government may be dragging its feet in a worsening energy crisis that threatens to drive up inflation and the cost of subsidies. Both would pile even more pressure on finances already strained by ambitious policies that Prabowo has promised will drive growth to levels not seen since the 1990s.
"The government is asking the public to remain calm without presenting concrete solutions,” said Bhima Yudhistira Adhinegara, executive director at the Jakarta-based Center of Economic and Law Studies. "This is highly risky, especially ahead of Eid Al-Fitr, when consumption typically rises.”
As Southeast Asia’s largest economy, Indonesia is the biggest importer of oil products in the region, sourcing much of that from supply now disrupted by the war.
Fuel stockpiles in nearby Singapore - which sells to its neighbor - are currently above average, but Indonesia’s own reserves are among the lowest in the region. That gives it little room to handle disruptions, even as the war heads into its third week.
Between March 12 and the end of the month, gasoline consumption is expected to increase 12% relative to normal conditions, according to the energy ministry. Gasoil use will fall 14.5% as fewer people are at work, but aviation fuel and kerosene consumption will rise. Stocks of liquefied petroleum gas, used in cooking and some industrial processes, stand at around 12 to 15 days, the ministry said on Friday.
A spokesperson for the Energy Ministry said fuel stocks were relatively secure because Indonesia has multiple sources of crude, and encouraged the public to refrain from panic buying and fuel hoarding. In a cabinet meeting Friday, Prabowo called on his government to take measures to cut costs and fuel consumption, without providing details. He asked his ministers to outline plans over the coming days.
Modest reserves are partly a product of Indonesia’s history as a major oil exporter in its own right. The country was among the first to join the Organization of the Petroleum Exporting Countries after its founding, and national crude output soared in the latter half of the 20th century, peaking at just under 1.7 million barrels a day in 1977.
Since then, though, production has declined precipitously to just over 600,000 barrels a day, as existing oil fields ran dry and investment in exploration dropped due to laws restricting foreign firms. Long an importer of refined products, due to limited refining capacity, the country became a net importer of crude in 2003.
But even as the country’s position changed, Indonesia continued to cap fuel prices, seen as a national entitlement given ample natural resources. Attempts to raise the cost of gasoline prices have historically led to protests and riots, most recently in 2022, when oil spiked during Russia’s invasion of Ukraine.
Even without energy inflation, many of Indonesia’s 280 million people have been struggling. Prabowo last year sacked his finance minister after widespread cost-of-living protests turned violent, and has since taken steps to help low-income Indonesians.
Imansyah, who like many Indonesians has only one name, is among those hoping for a continuation of the status quo - whatever happens in the Middle East. He relies on green, 3-kilogram cylinders of LPG, which usually cost about $1 thanks to subsidies, to fry chicken for his roadside stall. Even a $0.70 price rise would destroy his already thin margins, he said.
"I hope the government will not raise prices,” he said. "Hopefully they understand the condition of our country.”
Jakarta is already splurging to keep fuel cheap. Before the Iran war, the government expected to spend nearly 381 trillion rupiah ($22.5 billion) on subsidies - about 10% of its whole budget. That includes compensation payments for state-owned energy firms.
Prabowo told Bloomberg in a weekend interview that fiscal strain would be short-lived, and that his administration would seek to eliminate fuel subsidies in the next three years.
Until then, if oil prices stay at current levels around or above $100 a barrel, subsidy spending will stretch public finances. Finance Minister Purbaya Yudhi Sadewa has said the country would blow through its 3% legal deficit ceiling - a guardrail closely watched by investors - if Indonesia’s crude benchmark averages above $92 this year.
At the same time, Prabowo’s government has also ruled out any rise in fuel costs before the Eid holiday, a critical time for consumer spending. That may once again put him on a collision course with foreign investors, at a time when anxieties over governance and fiscal expansion have helped drive the rupiah to a record low.
"Prices will have to be increased in Indonesia, especially if the government also wants to pursue other projects with its budget,” said Natixis SA senior economist Trinh Nguyen.
There are silver linings. Some of Indonesia’s biggest exports, including coal, palm oil and liquefied natural gas, have all surged in price since the war, providing the government with some means of offsetting higher subsidies. Prabowo will also likely see the crisis as a vindication of his belief the country must pursue self-reliance - indeed, he has already demanded an acceleration of those efforts.
Neither will alleviate the immediate need for affordable fuel.
On Jakarta’s streets, some shoppers are already considering stocking up.
"I haven’t heard of any plans or contingency measures, which makes me and some of my friends question what the government is doing during this crisis,” said Abram Utama, a 35-year-old company director living on the outskirts of the capital. "My family and I are quite worried.”
--With assistance from Claire Jiao, Nicholas Lua, Norman Harsono and Eko Listiyorini.
-- ©2026 Bloomberg L.P.
