Indonesia’s state energy firm raises fuel prices, risking subsidy strain
Analysts warn the price increases could encourage better-off consumers to switch to products meant for lower-income households
State-owned energy company Pertamina’s move highlights Jakarta’s challenge in aligning fuel costs with global markets while insulating lower-income households from rising prices. By allowing the price of market-rate fuels to climb with that of global crude, subsidies for essential items can be preserved to prevent economic hardship and potential social unrest.
On Saturday, Pertamina raised the price of RON98 petrol, known in Indonesia as Pertamax Turbo, to 19,400 rupiah (US$1.13) per litre from 13,100 rupiah, while the cost of diesel products such as Dexlite and Dex climbed around 60 per cent.
Pertamina also raised the price of 12kg canisters of liquefied petroleum gas to 228,000 rupiah from 192,000 rupiah in Jakarta, East Java and Central Java.
Analysts said the direct effect on headline inflation could be limited, but warned that a widening gap between subsidised and non-subsidised energy prices could encourage better-off consumers to switch to products meant for lower-income households.
Some consumers complained about the new prices, particularly for 5.5kg and 12kg LPG canisters.