Indonesia Pledges to Hold Subsidized Fuel Prices Through 2026 as Oil Costs Strain Budget

Oil at $92 puts Indonesia's fuel pledge under pressure

Indonesia is keeping its pledge to freeze subsidized fuel prices through the end of 2026 even as its crude oil benchmark reaches about $92 a barrel, roughly $22 above the assumption used in the state budget. The government is calculating how much extra public money may be needed to cover the gap.

Bahlil Lahadalia, coordinating minister for downstreaming and energy transition and also minister of energy and mineral resources, reaffirmed the commitment at the Presidential Palace complex in Jakarta on October 21. He spoke after a plenary cabinet meeting reviewing the first two years of President Prabowo Subianto and Vice President Gibran Rakabuming Raka's administration.

Bahlil said the government expected crude prices could remain below $100 a barrel if the current trend continued. His central message was that higher oil costs would be handled through the budget while subsidized prices stayed unchanged.

Bahlil explained the calculation facing the government:

What we are calculating now is the global ICP, which keeps rising. As it rises, it will likely require additional subsidy funding. But the government is committed to not raising subsidized fuel prices.

What drivers would continue paying

Pertalite gasoline remains priced at Rp10,000 per liter and Biosolar diesel at Rp6,800 per liter, according to Deputy Energy and Mineral Resources Minister Yuliot Tanjung's reaffirmation of the policy. The commitment gives people buying those fuels certainty about the price at the pump through December 31.

A purchase of 10 liters of Pertalite therefore costs Rp100,000, while the same volume of Biosolar costs Rp68,000. Keeping those prices steady protects the fuel budgets of eligible motorists and businesses using subsidized products.

The promise concerns subsidized fuel. Officials also discussed stocks of other energy products, including liquefied petroleum gas, or LPG, but the price commitment described here is for subsidized gasoline and diesel.

Why the budget needs another calculation

The Indonesian Crude Price, usually shortened to ICP, is Indonesia's benchmark for crude oil. It helps the government estimate energy costs and plan the state budget. When actual oil prices move above the planning figure, maintaining a controlled retail fuel price can require more public funding.

Bahlil put the budget assumption at about $70 a barrel and the current ICP at about $92. That is an increase of approximately 31% above the assumption. The difference helps explain why ministers are reassessing subsidy needs even while leaving retail prices alone.

The extra spending cannot be calculated simply by increasing the subsidy budget by 31%. The final requirement also depends on how much subsidized fuel is sold, how prices develop over the remaining months and the rupiah cost of energy bought in dollars.

Bahlil did not announce an amount for the additional subsidy funding or a date for completing the calculation. For now, the decision on retail prices is firmer than the estimate of what maintaining them will cost.

How the commitment developed during 2026

The October statement renewed a policy announced months earlier. The Energy and Mineral Resources Ministry's April policy statement, published on April 17, recorded Bahlil's assurance that subsidized fuel prices would remain unchanged through the end of 2026 following instructions from President Prabowo.

The ministry said those instructions followed the president's visits to Russia and France. Bahlil delivered the earlier assurance after meeting Prabowo at the State Palace on April 16.

• April 16: Bahlil announced the commitment to keep subsidized fuel prices unchanged through the end of 2026.
• April 17: The Energy and Mineral Resources Ministry published the assurance, together with information on oil prices, stocks and imports.
• October 21: Bahlil repeated the commitment after the cabinet review and said rising crude prices could require additional subsidy funding.
• December 31: The government's stated price commitment runs through the end of the year.

The April and October statements show the same retail policy operating under changing cost conditions. By October, Bahlil's explanation focused on the potential need to add money to the subsidy budget.

Why the oil figures change across the year

Bahlil's April remarks put the average ICP from January to that point at no more than $77 a barrel. He also said fuel subsidies remained manageable with crude at $100 a barrel.

A subsequent statement put the completed April average at $117.31 a barrel, while the average from January to the time of that statement was around $80 to $81. The October figure of about $92 referred to the price then being discussed, rather than the earlier average.

A monthly average and an average covering several months answer different questions. An expensive month can sit alongside a lower average for the year because cheaper months pull the longer average down. The April statement was also issued before that month had finished.

The $100 figure was Bahlil's assessment of what the government could manage. The government's practical task is to finance the actual cost of keeping subsidized fuel prices stable as oil prices change over time.

Imports make dollar costs a domestic concern

Indonesia imports about 1 million barrels of oil a day, according to the ministry's April statement. Bahlil put national fuel consumption at 1.6 million barrels a day and domestic production at about 600,000 to 610,000 barrels a day.

On those figures, imports amount to roughly five eighths, or 62.5%, of daily consumption. The gap between domestic output and demand means international energy prices remain a major factor in Indonesia's fuel bill.

The rupiah adds another source of pressure. During Yuliot's reaffirmation of the price freeze, the currency was quoted as weakening to Rp17,877 per US dollar. Bank Indonesia had raised its benchmark interest rate by 50 basis points to 5.25% in response to currency volatility. Fifty basis points means half a percentage point.

Oil bought in dollars becomes more expensive in rupiah when the Indonesian currency weakens, even if its dollar price stays the same. Higher crude prices and a weaker currency can therefore push costs upward together while the subsidized price paid by motorists stays fixed.

Fuel availability carries a separate qualification

Bahlil's April assurance covered physical supplies as well as prices. The ministry said stocks of diesel, gasoline and LPG were above minimum standards.

Yuliot later described the minimum operational fuel reserve standard as 23 days and said stocks of Pertalite gasoline and CN48 diesel were above that threshold. He also said supplies of fuels sold without subsidies were sufficient to meet domestic demand.

By October 21, Bahlil described average energy availability as meeting national standards except for Pertalite, while still saying supplies were safe. He gave no stock figure or explanation for the Pertalite exception in those remarks. The October qualification therefore matters alongside the earlier assurances about reserves.

For motorists, availability and affordability are two practical needs: fuel must be at the station, and its price must fit the household budget. The government is promising stable subsidized prices while continuing to manage supplies.

Coal revenue could provide more budget room

Bahlil also presented stronger coal revenue projections at the October cabinet review. He said non-tax state revenue from coal was expected to exceed Rp160 trillion against a target of Rp133 trillion.

That would put receipts more than Rp27 trillion above target, an increase of more than 20%. Non-tax state revenue means money collected by the government outside its tax receipts. This is the coal figure most directly relevant to the government's available revenue.

Coal export earnings were separately projected to exceed $30 billion against a target of $27 billion. That would be more than $3 billion, or more than 11%, above target. Export earnings measure money generated by overseas sales; the state budget receives its own share through the applicable revenue arrangements.

The projections help explain why rising energy costs do not affect every part of Indonesia's economy in the same way. Imported oil becomes more expensive, while coal can bring in stronger receipts. Bahlil presented both developments, but announced no allocation of the projected coal revenue surplus to fuel subsidies.

How officials plan to sustain the freeze

Septian Hario Seto, a member and executive secretary of the National Economic Council, known by its Indonesian initials DEN, said maintaining subsidized fuel prices helped protect purchasing power. He also said the policy should be paired with measured fiscal management.

Septian said the council discussed funding strategies involving the Finance Ministry and BPI Danantara, Indonesia's investment management body. The aim was to keep fuel prices stable through the end of the year while keeping the financing sustainable.

The government is also seeking to reduce pressure from imports. Yuliot said officials were pushing for higher domestic oil production and preparing domestic refineries. In April, Bahlil said discussions with Russia included potential investment in refineries and energy storage, alongside crude oil supply.

At that stage, Bahlil said the refinery and storage proposals still needed one or two further rounds of discussions. More production, refining and storage would address different parts of the supply system: producing crude, turning it into usable fuel and holding reserves. The immediate task through December remains paying for stable subsidized prices and keeping fuel available.

Key Points

• Indonesia has reaffirmed that subsidized fuel prices will remain unchanged through the end of 2026.
• Pertalite remains Rp10,000 per liter and Biosolar Rp6,800 per liter under the stated policy.
• Bahlil put current ICP at about $92 a barrel, compared with a budget assumption of about $70.
• The government is calculating additional subsidy needs but has announced no funding amount.
• Indonesia imports about 1 million barrels a day against consumption of 1.6 million barrels a day.
• Coal non-tax state revenue is projected to exceed Rp160 trillion against a Rp133 trillion target.
• October supply assurances included an unexplained qualification about Pertalite meeting national standards.