Jakarta –
World oil prices are boiling amidst the war between the United States & Israel and Iran. The war has caused oil prices to skyrocket past the level of US$ 100 per barrel.
The government was also asked to immediately look for concrete steps to anticipate increases in world oil prices. This is because the increase in oil prices puts the APBN at risk of holding back energy subsidies, especially fuel prices for the public.
If the government finally raises fuel prices because the APBN is no longer able to withstand the fluctuations, it could have a terrible impact on the Indonesian economy.
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Gadjah Mada University Energy Observer Fahmy Radhi said that increasing fuel prices in the community has the potential to increase inflation in prices of basic necessities which will ultimately reduce people’s purchasing power.
“If (subsidized energy prices) are increased, this will also have an impact on inflation which may be quite high, then purchasing power will also decrease, the burden on hundreds of small people will become heavier,” explained Fahmy to detikcom, Monday (9/3/2026).
According to him, increasing fuel prices is also very risky ahead of the Eid homecoming. Double inflation could occur if this were done.
“It’s quite risky if it is increased now. Moreover, the increase will coincide with the holidays. Well, this holiday must have inflation, so there will be double counting inflation,” said Fahmy.
Meanwhile, Executive Director of the Center of Economic and Law Studies (Celios) Bhima Yudhistira assessed that the increase in fuel prices could slowly plunge the Indonesian economy into the brink of recession.
Bhima predicts that when fuel prices rise because they cannot be supported by the APBN, inflation could reach 6-8% annually. People are holding back their purchasing power and industry is experiencing sluggish demand. This caused a storm of layoffs to occur.
“In the end, layoffs rose sharply in all sectors, including the manufacturing industry and trade,” said Bhima to detikcom.
Furthermore, this caused the number of the middle class to fall from being vulnerable to poverty to being on the poverty line. In the end, an economic recession occurred due to weakening purchasing power.
“The number of the middle class which has fallen to become vulnerable and poor has increased significantly, Indonesia could enter an economic recession,” said Bhima.
Cut the MBG-Kopdes Merah Putih Estimate
To prevent fluctuations in world oil prices affecting the Indonesian economy, the government has been asked to immediately anticipate, one of which is diverting the budget to large programs to control fuel price increases, such as the Free Nutritious Meals (MBG) budget and the Red and White Village Cooperative. Bhima believes that holding back the rate of inflation is more urgent than providing free food.
“It is urgent to shift the MBG, Kopdes and IKN budgets to buffer fiscal space. The option of increasing fuel prices, both non-subsidized and subsidized, must be avoided because the budget can still be shifted first,” said Bhima.
“Maintaining inflation is more important than MBG for now because of force majeure,” said Bhima.
His party has made calculations, it is predicted that there is around IDR 340 trillion of budget that can be reallocated from large projects that take up huge budgets and unproductive spending carried out by the government.
“Celios’ calculations are 340 trillion from the reallocation of MBG, Kopdes and other unproductive spending,” explained Bhima.
Returning to Fahmy, he said the government had a dilemma of choice, between maintaining people’s purchasing power or holding back the budget for priority programs. However, Fahmy believes that in conditions like these, the government would be better off relocating the budget to control fuel prices.
“It is recommended to refocus, the budget is large, so there is no need to increase subsidized fuel prices,” concluded Fahmy.
Fahmy estimates that currently oil prices have no signs of falling. There are two things that make oil prices continue to boil, firstly the war taking place in the Middle East and secondly Iran’s move to close the Strait of Hormuz which is the world’s energy logistics route.
If it has now reached US$ 110 per barrel, oil prices could still continue to climb to the level of US$ 150 per barrel. This means that it is time for the government to look for ways to contain the impact of the price increase on the APBN.
He also quoted a statement from Minister of Finance Purbaya Yudhi Sadewa who stated that if world oil prices rose to US$ 90 per barrel, the APBN would be able to calm the turmoil. In the APBN, the oil price assumption is set at US$ 70 per barrel. However, currently fuel prices are very far from these assumptions, so he emphasized that the government needs to take precautions immediately.
“Well, because of this, our fiscal burden is now very heavy, right? Especially for subsidies,” said Fahmy.
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