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Rising Oil Prices Predicted to Increase Energy Subsidies by Rp107 Trillion

Adi Ahdiat 06/05/2022 10:40 WIB

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According to an analysis by LPEM FEB UI, the increase in crude oil prices is estimated to increase energy subsidy spending from Rp134 trillion to Rp241.4 trillion in 2022.

Indonesia's Energy Subsidy Spending Projection (2022)

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Rising Oil Prices Predicted to Increase Energy Subsidies by Rp107 Trillion

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Indonesia's Energy Subsidy Spending Projection (2022)

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Indonesia's Crude Price (ICP) averaged US$113.5 per barrel in March 2022. This is the highest level since 2013, and 80.2% more expensive than the US$63 per barrel assumed in the 2022 State Budget macroeconomic assumptions.

According to Teuku Riefky, an economist at LPEM FEB UI, this oil price increase will add approximately Rp107.4 trillion to the government's energy subsidy spending.

"This is estimated to increase energy subsidy spending from Rp134 trillion to Rp241.4 trillion in 2022," Riefky explained in the *Indonesia Economic Outlook Q2 2022* report released on Friday (6/5/2022).

"With this estimate, the oil price increase alone, not including the increase in other commodity prices, will tighten the fiscal space, which has been considered narrow from the outset," Riefky continued.

To ease the government's fiscal burden, Riefky proposed that the government set fuel prices according to market prices.

"By setting fuel prices that follow market prices, the Indonesian government can overcome supply shortages because market prices will ensure that demand is met," Riefky explained.

Riefky also suggested a policy option to change the subsidy mechanism, from product subsidies to subsidies targeted at relevant agents.

"This policy will also ease the fiscal burden because the cost of price increases will be borne directly by consumers who can afford the actual price of fuel," Riefky explained.

"For the poor and vulnerable groups, the Indonesian government can provide protection against fuel price increases by providing direct subsidies to households. For example, by implementing a scheme similar to that provided by the Indonesian government to subsidize cooking oil prices, namely by providing direct cash assistance (BLT)," Riefky suggested.

Editor : Adi Ahdiat

"Disclosure: This is an AI-generated translation of the original article. We strive for accuracy, but please note that automated translations may contain errors or slight inconsistencies."

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Rising Oil Prices Predicted to Increase Energy Subsidies by Rp107 Trillion

Rising Oil Prices Predicted to Increase Energy Subsidies by Rp107 Trillion

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Rising Oil Prices Predicted to Increase Energy Subsidies by Rp107 Trillion

Rising Oil Prices Predicted to Increase Energy Subsidies by Rp107 Trillion

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Related Data

By the end of 2025, the Government will raise the benchmark price for all grades of Indonesian coal.

Gorontalo Provincial Minimum Wage Increases by 5.69% in 2026

North Sulawesi's Provincial Minimum Wage to Increase by 6.02% in 2026

Indonesia's Electronic Money Spending Transaction Volume Increased in Q3 2025

The number of Indonesian State-Owned Enterprises continues to decrease through 2024.

Age Group of "Female Breadwinners" in Indonesia 2024, The Majority are Elderly

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