Global oil shock reaches Indonesia

Going up: Attendants at a petrol station in Tangerang. Pertamina has raised the prices of all its unsubsidised gasoline and diesel brands, pushing some consumers to the more limited subsidised variants. — AFP

JAKARTA: The sharp rise in global oil prices has crept onto Indonesian shores, with diesel shortages and fuel price hikes unfolding in some parts of the archipelago in recent weeks as the government winds down price control policies in the interest of fiscal consolidation.

Logistics firms have reported delivery delays because trucks are spending more time lining up for Solar, subsidised diesel, at petrol stations, particularly in Sumatra, Sulawesi and Kalimantan.

Meanwhile, state-owned oil giant Pertamina raised the prices of all its unsubsidised gasoline and diesel brands, pushing some consumers to the more limited subsidised variants.

The government plans to gradually raise the prices of the subsidised Pertalite brand of gasoline and 3kg liquefied petroleum gas, the most popular fuel brands in their respective categories, in the coming months.

“All (fuel prices) will go up. There are none that will not go up. So, we will do it gradually,” Coordinating Maritime Affairs and Investment Minister Luhut Binsar Pandjaitan said last Friday about the planned price hikes.

These developments mark the winding down of government energy price control policies meant to shield Indonesian consumers from the effects of surging oil prices amid a global economic recovery and the Russia-Ukraine war.

World crude oil benchmark Brent has exceeded US$100 (RM422) per barrel, almost double the US$63 (RM266) per barrel assumption in the 2022 state budget, which had set aside 134 trillion rupiah (RM39bil) for energy subsidies.“Pertalite’s price hike will have a huge direct impact on the people as it is (expected) to increase public transportation costs and staple food prices,” Mohammad Faisal, the Centre of Reform on Eco nomics Indonesia executive director, said on Tuesday.

“This will erode the purchasing power of the lower middle class.” The government had decided to ease price controls to minimise energy subsidy spending in achieving fiscal consolidation plans, which include reinstating a budget deficit cap of 3% gross domestic product by 2023.

On top of subsidies, the government is obligated to compensate Pertamina for losses on certain sales and for subsidies from last year. Pertamina started raising fuel prices on March 3 by targeting three types of non subsidised fuels, namely Pertamax Turbo, Dexlite and Pertamina Dex.

These are the company’s priciest and highest grade fuels.

Pertamina data shows that all these unsubsidised fuel brands contribute 17% of total petrol and diesel consumption, with Pertamax being used the most.

The remaining 83% comes from Solar and Pertalite.

Pertalite consumption increased 10% to 15% as more consumers shifted to the subsidised fuel after Pertamax prices were raised, according to Pertamina fuel distributor subsidiary PT Pertamina Patra Niaga president director Alfian Nasution. — The Jakarta Post/ANN

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