The world is facing growing uncertainty. Geopolitical tensions in the Middle East, particularly the increasing risk of disruption in the Strait of Hormuz, have reshaped the global energy landscape within a short period. The Strait of Hormuz is not merely a narrow maritime passage but one of the world’s most strategic energy corridors, with approximately one-fifth of global oil and LNG supplies passing through it. Consequently, any disruption in the region immediately affects global oil and gas prices, logistics costs, and ultimately the cost of living in many countries.
Indonesia is not insulated from these developments. As global oil prices continue to rise well above the assumptions used in the State Budget (APBN), the rupiah remains under pressure, and energy subsidy and compensation costs continue to increase, the government faces a difficult policy choice. It can either maintain fuel prices at the risk of placing greater pressure on the fiscal budget and the balance sheets of state-owned energy enterprises, or implement limited price adjustments to preserve fiscal sustainability.
This challenge is not unique to Indonesia. Several countries are facing similar policy dilemmas. Japan has strengthened its energy resilience through strategic petroleum reserves and diversification of import sources. The Philippines has introduced emergency policy measures to manage fuel price pressures. India has adjusted part of its domestic energy prices, while OPEC+ has recalibrated oil production to maintain market stability. These developments demonstrate that the global energy crisis cannot be eliminated through rhetoric. Instead, it must be managed through measured, realistic, and well-targeted policies.
Against this backdrop, on June 10, 2026, Pertamina Patra Niaga, in coordination with the government, adjusted the prices of non-subsidized fuels. The price of Pertamax 92 increased from IDR 12,300 to IDR 16,250 per liter, representing a 32.1 percent increase, while Pertamax Green 95 rose from IDR 12,900 to IDR 17,000 per liter, an increase of 31.8 percent. Earlier, in May 2026, the government had also adjusted the price of Pertamax Turbo.
GREAT Institute considers this price adjustment a necessary corrective measure to prevent deeper fiscal pressures. The institute noted that as early as April 2026, it had warned that the combination of high global oil prices and the depreciation of the rupiah would significantly narrow Indonesia’s fiscal space.
GREAT Institute Economic Researcher Adrian Nalendra Perwira explained that the decision should be understood as a difficult but increasingly unavoidable policy choice after global oil prices remained well above the assumptions in the State Budget and the rupiah continued to weaken.
According to Adrian, maintaining the price of Pertamax for more than three months while the Indonesian Crude Price (ICP) reached US$106.56 per barrel in May 2026, far exceeding the APBN assumption of US$70 per barrel, and with the rupiah surpassing IDR 18,000 per US dollar, was not a sustainable policy. Maintaining the previous price would eventually shift the financial burden to Pertamina’s balance sheet, weaken the company’s cash flow, and ultimately create greater pressure on the government’s fiscal position.
GREAT Institute also noted that even after the adjustment, the retail price of Pertamax remained below its estimated economic price, which was projected to range between IDR 17,000 and IDR 18,000 per liter based on May 2026 market conditions.
At the same time, the government’s decision to maintain the prices of Pertalite at IDR 10,000 per liter and Biosolar at IDR 6,800 per liter deserves appreciation as an important safety net for low-income households and transportation users who are most vulnerable to rising energy prices.
However, Adrian emphasized that the policy should not stop at price adjustments alone. The government must also anticipate its implications for inflation, household purchasing power, and the potential shift in fuel consumption from Pertamax to Pertalite.
A sharp and sudden increase in fuel prices could create psychological pressure among consumers, particularly urban workers, motorcycle users, and small business owners who have relied on Pertamax for their daily activities.
According to Adrian, although Pertamax is a non-subsidized fuel and is not the primary fuel used by public transportation, meaning its direct impact on inflation is likely to remain relatively limited, the government should not overlook its effect on public expectations. Significant fuel price increases can shape public perceptions that the overall cost of living will continue to rise.
GREAT Institute identified three major risks that require immediate government attention.
First, pressure on the purchasing power of middle-income and vulnerable middle-income households that rely on private vehicles but do not necessarily belong to high-income groups.
Second, increasing operational costs for small businesses, informal logistics providers, ride-hailing drivers, and various daily economic activities that are highly sensitive to transportation expenses.
Third, the growing risk of consumers shifting from Pertamax to the subsidized Pertalite due to the widening price gap between the two fuels.
According to Adrian, this migration represents the greatest risk. If a significant number of Pertamax users switch to Pertalite, the expected fiscal savings from the Pertamax price adjustment could diminish substantially. Instead, fiscal pressures could shift toward Pertalite subsidies through higher consumption and increased subsidy quotas.
Therefore, controlling Pertalite consumption must be accompanied by expanding transportation alternatives for the public. As long as urban communities remain highly dependent on private vehicles, every increase in energy prices will directly translate into higher household living costs. Affordable, reliable, safe, and integrated public transportation therefore serves as a crucial structural buffer.
GREAT Institute believes that non-subsidized fuel price adjustments will be easier for society to absorb if people have adequate transportation alternatives that reduce dependence on private vehicles.
To minimize the negative effects of the policy, GREAT Institute proposes five follow-up policy measures.
First, the government should tighten the distribution of Pertalite by accelerating vehicle-based restrictions and expanding the MyPertamina QR Code system, accompanied by regular monitoring of fuel volumes at service stations to detect consumption shifts at an early stage.
Second, the government should adopt a more gradual and predictable fuel pricing mechanism. Smaller but more frequent adjustments are considered easier for the public to absorb than large increases resulting from prolonged delays.
Third, the government should strengthen purchasing power protection by maintaining affordable public transportation fares, preventing excessive increases in public service tariffs closely linked to household expenditures, and providing temporary support to vulnerable workers and small businesses most affected by rising transportation costs.
Fourth, public transportation should be strengthened through improvements in service quality, frequency, safety, multimodal integration, affordability, and supporting infrastructure such as bus stops, pedestrian pathways, park-and-ride facilities, and first-mile and last-mile connectivity.
Fifth, the government should maintain fiscal transparency and certainty by openly communicating the amount of compensation owed to Pertamina, the payment schedule, and the government’s energy pricing roadmap through the end of the year. Such certainty is essential for Pertamina’s cash flow, the credibility of the State Budget, and the stability of the rupiah.
Over the medium term, GREAT Institute believes that the increase in Pertamax prices should serve as momentum to reform Indonesia’s energy subsidy architecture.
According to Adrian Nalendra Perwira, energy subsidies have often benefited groups with greater access to energy consumption, while lower-income households continue to bear indirect costs through inflation and limited public services. Therefore, reforming energy subsidies does not mean reducing the state’s role. Instead, it means ensuring that subsidies are directed toward people who genuinely need them rather than toward commodities consumed across all income groups.
Adrian further emphasized that fuel pricing policy should be viewed as part of maintaining Indonesia’s overall economic credibility. Amid pressure on the rupiah, rising interest rates, and increasing market attention toward Indonesia’s fiscal sustainability, the government must demonstrate that the State Budget continues to be managed prudently without neglecting household purchasing power.
According to him, while the increase in Pertamax prices is fiscally realistic, its implementation must be carefully managed to prevent additional pressure on inflation, household purchasing power, and Pertalite subsidies. Ultimately, energy price reform should be directed toward building a subsidy system that is fairer, more transparent, and more sustainable.
